5.13 Meeting Payment and Settlement System Obligations
C 33/2015 STA Effective from 3/1/2022- a.Irrespective of whether an IB uses a net or a gross payment and settlement system, it must be able to manage short-term (overnight and intraday) liquidity in order to meet, on a timely basis, its payment and settlement obligations in all circumstances.
- b.In view of the interdependencies and interconnectedness between payment and settlement systems, IBs must ensure that its critical payments are always made on a timely basis in order to avoid any potential systemic disruptions, which could prevent the smooth functioning of other payment systems and money markets.
- c.IBs must monitor important liquidity flows and must directly contact the counterparties in the case of any late payments. IB must also assign clear roles and responsibilities with respect to the intraday management of liquidity. Looking at the time-critical nature of intraday liquidity management, IB must be able to formalise its decision-making and follow-up processes so that settlements can be monitored on a continuous basis with proper internal controls and allocation of responsibilities. Its management information system must be facilitative enough to provide the senior management and other relevant personnel with information on the IB’s liquidity and collateral positions, with flexibility to provide more detailed information when needed, especially during stressed market conditions.
IBs must implement back-up measures in order to reduce any operational problems, such as problems with trading and settlement systems, information system networks and unauthorised access to the systems, etc. The IB must also take account of intraday considerations in its stress testing and scenario analysis exercise, the results of which must be incorporated into its CFP. IB must include the possibility of any unforeseen interruption in its intraday liquidity flows as a part of its liquidity risk planning.