Oversight of payment and settlement systems is a central bank function. The Act LVIII of 2001 on the Magyar Nemzeti Bank (MNB) defines as one of the basic tasks of the MNB the development of the payment and settlement systems, including securities clearing and settlement systems and monitoring their activities in order to achieve sound and efficient operation and smooth money circulation.
The framework is mainly built on a risk- and efficiency-based approach. The scope of the oversight is always the system which includes not only the central infrastructure providing clearing and settlement services, but also the participating institutions.
The legal background provides a proper toolkit (licensing, approval of system rules and regulations, control, regulating power, moral suasion etc.) to the MNB which enables the central bank to fulfil its oversight function efficiently.
By taking the international recommendations into consideration, the MNB has elaborated a complex framework for exercising its oversight activity, which covers
- determining and regulating the requirements against the overseen systems,
- continuously monitoring and controlling the operation of the overseen systems,
- assessing the overseen systems against requirements based on international recommendations,
- imposing measures and following up their implementation.
In respect of clearing houses for credit institutions the MNB is entitled to issue and withdraw operation licences, and to approve system rules and regulations. As regards licensing the capital market clearing house activity under the Capital Market Act and central depository activity and approving related operating rules, the MNB exercises agreement right towards the Hungarian Financial Supervisory Authority.
The oversight activity is supported by the Co-operation Agreement entered into with the Hungarian Financial Supervisory Authority performing the money and capital market supervision and in international relation the Co-operation Agreement concluded between the authorities overseeing the high value interbank payment systems of the EU member states and the banking supervisory authorities.