Laura WilesHM Treasury has published a response to its 2022 call for evidence and consultation on payments regulation and the systemic perimeter. The Government confirms it will progress reforms to BoE and PSR’s respective statutory perimeters over payments.
The consultation proposed expanding BoE’s supervision of systemic risk relating to payments by introducing an additional category of ‘service provider’ to the Banking Act, to allow for the recognition of payments providers that pose systemic risks in their own right. Under this category, the source of risk would relate to the provider itself, not its relationship with an already-recognised payment system. The consultation also proposed removing non-payments related critical third parties from Banking Act regulation (as the Government has separately established a critical third parties regime under FSMA 2023), considered how the SMCR ought to be applied to payments, and proposed changes to the regulatory framework of the PSR.
Almost all respondents agreed that reforming the perimeter via the Banking Act, so that HM Treasury retains control over who enters BoE’s perimeter, was the most proportionate and effective means for enabling revisions. In response to concerns over the practical effect of any legislative change, HM Treasury noted that while it is for BoE itself to articulate how it intends to supervise the reformed perimeter, the Government will issue a further public statement setting out its legislative approach as it determines a suitable vehicle for enacting reforms.
The Government issued a call for evidence earlier this year on the current legislative framework of the SMCR, and is currently considering responses. Through the payments consultation, it had already sought industry views on the extension of the SMCR to both recognised systemic payments entities and authorised PSPs and EMIs. It is expected to set out next steps regarding extensions to BoE or FCA’s remit over payments after its broader review of the SMCR is concluded.
The Government will also bring forward secondary legislation to reform PSR’s payment system access framework. This will involve revoking the access framework in Part 8 of the PSRs 2017, leaving PSR to apply the framework in Part 6 of Financial Services (Banking Reform) Act 2013 in all cases. Respondents were supportive of these proposed reforms, provided that simplifications are handled in a clear and non-disruptive way, and that popular elements of the PSRs 2017 framework – such as the proportionate and non-discriminatory (POND) criteria – are retained.