Senate Approves Bill to Monitor and Regulate Payment Systems

The Senate has passed legislation to protect the country’s clearing and settlement systems from disruptions that could lead to instability in the financial sector, and create loss of confidence in the public payment regime.
The reforms are being carried out under internationally accepted standards and practices, to ensure its safety and efficiency.
The Payment Clearing and Settlement Act, 2010 was passed by the Senate with seven amendments on Friday (November 26). This followed the suspension of the debate on Friday (November 2), to review changes proposed by members.
Concluding the debate, Leader of Government Business and Attorney-General and Minister of Justice, Senator Hyacinth Lightbourne, stated that a recommendation from Opposition Senator, Mark Golding, on the definition of Systemic Risk was accepted.
She noted that Senator Golding had questioned the definition of systemic risk in the Bill, as the inability of a participant to meet its obligations, which would cause another participant to be unable to meet its obligations, as well. But, Senator Golding had suggested that systematic risk is wherever a participant is unable to meet its obligation in the system.
“It was taken on board, and the definition of systematic risk is (now) the inability of a participant to meet its obligation, in a clearing and settlement system, as they become due; as this will cause other participants, in the clearing and settlement system, to be unable to meet their obligation as they become due, or will cause significant liquidity or credit problems that might threaten stability and confidence in the financial sector,” she explained.
Another amendment, Senator Lightbourne acknowledged, was that the Bank of Jamaica should not be excluded from the definition of Clearing House.
“The bank does provide clearing facilities, (so) there is nothing to preclude it from operating as a clearing house,” Senator Lightbourne pointed out.
It makes provision for the establishment of an advisory body, the National Payments Systems Council, which is already in place and comprises representatives of the Ministry of Finance and the Public Service, the Financial Services Commission, the Jamaica Stock Exchange, and other entities in the financial system.
The national payment system comprises a set of payment instruments, procedures and rules whereby funds are transferred among a defined group of participants, to facilitate the circulation of money within the country and internationally. Consequently, the Government has decided to strengthen the national payments system.
The Bill seeks to establish a new legal basis for the regulation of the payments system and to make provisions for, inter alia, the designation of “systemically important payments systems” and the regulatory oversight of these systems.