On 29 September 2016, the Bank of England (Bank) published a consultation paper outlining a draft code of practice and supervisory statement for the governance of recognised payment system operators (RPSOs).

The proposals, designed to reduce risk, set out the minimum requirements and standards that will be expected by the Bank and focus (amongst others) on governance arrangements, the composition of the board, conflicts of interest, performance management and records.

The code will be binding on RPSOs to which it applies and the Bank may take enforcement action against any RPSO which fails to comply with the requirements. The supervisory statement sets out how the Bank expects relevant RPSOs to comply with the code. Whilst not binding, it will provide guidance on how the Bank will assess compliance with the code.

What this means for you

The consultation paper will be relevant for operators of all RPSOs, their shareholders, members, users and other stakeholders. The Bank however proposes that the code will not apply to a recognised payment system that is operated by a recognised clearing house or central securities depository as these are or will be subject to other requirements.

The Bank invites comments on Part 1 of the code and associated supervisory statement. The consultation will close on 2 December 2016. The Bank will, in due course, produce a final version of the code and supervisory statement and presently anticipates allowing a twelve month lead in time from the publication date for RPSOs to achieve compliance with the requirements.

The Bank recommends that RPSOs start to consider a transition plan for compliance with the code and to also have regard to the proposed requirements if they are considering changes to their governance arrangements in the interim period.

The Bank also intends to consult on further parts of the code and further supervisory statements which will set out additional requirements and expectations.