Recognised systems
Section 184: Recognition order
411.Subsection (1) gives the Treasury the power to designate an inter-bank payment system as a recognised system. Once a payment system is ‘recognised’, the Bank of England’s powers of formal regulatory oversight specified in this Part apply.
412.Subsection (2) provides that a recognition order must include as much detail as is reasonably practicable of the arrangements that constitute the inter-bank payment system.
413.Subsection (3) provides that a payment system operated solely by the Bank of England may not be recognised.
Section 185: Recognition criteria
414.Subsection (1) provides that the Treasury may make a recognition order only if it is satisfied that any deficiencies in the design of the inter-bank payment system, or any disruption of its operation, would be likely to threaten the stability of, or confidence in the UK financial system (consequences of a “systemic nature”) or could have serious consequences for business or other interests throughout the United Kingdom (“system-wide consequences”).
415.Subsection (2) stipulates the considerations that the Treasury must have regard to when deciding whether to make a recognition order in relation to an inter-bank payment system. These criteria include the volume and value of the transactions processed (or potentially processed) by the system (see subsection (2)(a)), the nature of these transactions (see subsection (2)(b)), the availability of alternative systems that could handle the transactions in the case of a system failure (see subsection (2)(c)), the relationship of the system with other systems (such as interdependence), (see subsection (2)(d)) and whether the Bank of England uses the system in its role as a monetary authority (as defined in section 244(2)(c)).
Section 186: Procedure
416.This section sets out the procedure for the making of recognition orders. In particular, the Treasury must first consult the Bank of England and the operator of the inter-bank payment system and consider representations made (see subsection (1)). It must also consult the FSA where the operator is or has applied to become a recognised investment exchange, a recognised clearing house or has, or has applied for permission under Part 4 of the Financial Services and Markets Act 2000 (see subsection (2)).
417.Subsection (3) provides that the Treasury may rely on information supplied to it by the Bank of England and the FSA to inform its consideration of whether to recognise a particular inter-bank payment system.
Section 187: De-recognition
418.Subsection (1) gives the Treasury the power to revoke a recognition order.
419.Subsection (2) provides that the Treasury must revoke a recognition order if the criteria under which recognition was made (section 185) are no longer met.
420.Subsections (3) and (4) set out the process involved in revoking a recognition order. This process involves the same consultation process as required for the making of a recognition order.
421.Subsection (5) ensures that if an operator of a recognised payment system requests that its recognition order made under this Part be revoked, the Treasury must consider the request.
