Oversight Approach
SAMA being a member of Committee on Payments and Market Infrastructure (CPMI) was involved in the development of CPSS-IOSCO Principles for Financial Market Infrastructure (PFMIs). These Principles are international standards and provide baseline for effective risk management in the operations of FMIs. SAMA has committed to fulfill its responsibilities under the PFMIs wherein central banks have been made responsible to adopt and apply the CPSS-IOSCO Principles for Financial Market Infrastructures for the regulation, supervision and oversight of payments and financial settlement systems. It was in this context that SAMA vide its circular letter date 08/10/1434H has made the implementation of PFMIs mandatory. Consequently, SAMA’s oversight approach will be as follows:
Applicability of PFMIs
1. All Principles related to Payment Systems will be applicable on the SIPS i.e. SARIE, SADAD and mada. Further PFMIs applicability on the SAMA’s owned and operated systems will be in line with BIS guidance on “Application of the Principles for financial market infrastructures to central bank FMIs” issued in August 2015.
2. For CCPs, SSS and CSD, SAMA will exercise its oversight functions and implement the contents of the Memorandum of Agreement(MOA) in cooperation with the Capital Market Authority for applicability of PFMI on these FMIs.
In addition to the PFMIs, SAMA may also mandate the compliance of other CPMI and IOSCO guidelines related to FMIs (e.g. Guidance on cyber resilience for financial market infrastructures)
Obligations of the Payment and Financial Settlement Infrastructure
The primary responsibility for ensuring the safety and efficiency of the payment and financial settlement infrastructure lies with the owners and operators of the infrastructure. In order to ensure this, payment and financial settlement infrastructure in line with PFMIs (Principle 23) are required to assess themselves against the PFMI at least once a year or as mandated by SAMA from time to time. Payment and financial settlement infrastructures are also required to disclose publicly responses to PFMI in line with CPSS-IOSCO Disclosure Framework for Financial Market Infrastructures.
By complying with the Principles, the payment and financial settlement infrastructure should be able to demonstrate that:
1. Infrastructures operated by them are safe and efficient.
2. They have proper procedures in place for identifying and managing risks specifically focusing on credit, liquidity, settlement, and operational risk in their respective business activities;
3. They are complying with the relevant SAMA rules and regulations and any additional requirements issued by SAMA from time to time.
4. They have sufficient MIS to provide relevant information or documents as required by SAMA from time to time.