Oversight Scope
The oversight scope refers to the different types of payment and financial systems and settlement infrastructures like Payment Systems, Securities Settlement Systems (SSS), Central Counter Parties (CCP), Central Depository Companies (CDC) and Trade Repositories (TR) that will either be subject to SAMA’s direct oversight or will be overseen in coordination with other regulators like Capital Markets Authority. Further, SAMA in order to ensure the smooth functioning of the payment and financial settlement will also oversee the payment instruments, critical infrastructure providers. Consequently SAMA’s oversight scope will cover the following:
A. Payment Systems
Payment Systems are an integral part of the Financial Market Infrastructure, enabling retail, wholesale, capital, money and foreign exchange markets to discharge their payment obligations. In order to prioritize its oversight function and focus on systemically important payment systems SAMA vide its regulation titled “Criteria for Systemically Important Payment Systems in Kingdom of Saudi Arabia” dated January 2015 has directed that a system which meets any one, or combination of, the following criteria will be classified as a systemically important system:
a) Any system handling interbank or customer payments which could pose a risk to financial stability.
b) The principal payment system in terms of the aggregate daily volume and value of payments
c) Any system used to effect settlement in other systemically important FMIs
d) Any system, which is central to the payments infrastructure and our customer confidence due to number and type of participants, market penetration and lack of alternatives available.
Based on the above criteria, three PS have been designated as Systemically Important Payment Systems (SIPS) namely:
1) SARIE (Saudi Arabian Riyal Interbank Express) is the is the Real Time Gross Settlement (RTGS) system that transfers fund in Saudi Riyal within the kingdom of Saudi Arabia and through which all transfers to beneficiaries of all categories pass. In addition, SARIE provides settlement services to other payment systems to which it is linked. These include Automated Clearing Houses (ACH), an electronic cheque clearing system; the Saudi Payments Network (MADA), which links all ATM and EFTPOS terminals, the Electronic Securities System (TADAWUL); and also the electronic Bill Presentment & Payment (SADAD).
2) MADA (formerly known as “SPAN”) is the national ATM and Points of Sale network that connecting all Saudi banks and providing a common service point to the customer and allows them electronically access to their funds with any bank, anywhere in the Kingdom, around the clock.
3) The electronic Bill Presentment & Payment (SADAD) is the national electronic bill payment system allows individuals and businesses to pay bills via bank branches, ATMs, online and phone banking.
B. Trade Repositories
Trade repositories are centralize collection, storage and disseminations of trades and transactions data primarily related to derivatives and thus ensure the transparency of information to relevant stakeholders. The trade repository known as SATR in the Kingdom is operated and hosted by SAMA and with the introduction of derivatives trading in the Kingdom the operations of the SATR in line with PFMI will become more critical.
C. Payment Instruments
The safety and efficiency of payment instruments can also impact public’s confidence and perception about the payment systems in KSA. SAMA, therefore, in order to ensure the public trust and compliance with the different regulatory direction issued from time to time will oversee the payment instruments in the Kingdom.
D. Critical Infrastructure Providers
Critical Infrastructure Providers (CIP) enable FMI’s to operate their systems reliably and efficiently by providing services related to their IT Systems, Messaging and Telecommunication Networks. The oversight expectation applicable to CIPs therefore include but not limited to having a formal risk identification and management framework, appropriate information security policies and procedures and high levels of reliability and resilience.
E. Co-Operative Oversight
Central Counter Parties (CCPs), Securities Settlement Systems and Central Securities Depositories (CSD) are FMIs primarily related to the securities and derivatives markets. The primary regulator of CCPs, SSS and CSDs is the Capital Markets Authority (CMA) in KSA. However, as these FMIs require access to the account held by SAMA in order to effect the payment legs of securities or derivatives transactions and are important source payment systems participants’ liquidity in some cases, therefore, SAMA has an inherent interest to ensure that these FMI are safe and efficient.
SAMA and CMA therefore in order to formalize their roles and responsibilities i.e. SAMA as Banking Supervisor and Payment Systems Overseer and CMA as Securities and Derivatives market regulator has signed a Memorandum of Agreement (MOA) to ensure a formal legal and regulatory cooperation and coordination framework for the oversight of CCPs, SSS and CSDs.