Finance Minister Winston Jordan two weeks ago tabled a bill for the establishment of a National Payments System (NPS) which will encompass a broad range of areas including licensing, fees and charges and money transfer agencies .
The National Payments System Bill 2018 is part of government’s efforts to upgrade the laws, regulations and infrastructure for a safe, efficient and modern payments system.
According to the bill, NPS means “the whole of the services that are associated with the sending, receiving and processing of orders of payment or transfers of money in domestic or foreign currencies, issuance and management of payment instruments, payment systems, clearing systems, including those processing securities, arrangements and procedures associated to those systems and services, and payment service providers, including operators, participants, and any third party acting on behalf of them, either as an agent or by way of outsourcing agreements, whether entirely or partially operating inside Guyana.”
The bill’s explanatory memorandum explains that the bill provides for the establishment of an NPS Council, sets out its general powers and duties and lays out the operational role of the Bank of Guyana (BoG) in relation to the Council.
Section 3 of the bill specifically notes that the bank shall regulate and oversee the NPS as a whole with the aim of reducing any inefficiencies and potential risks and ensuring its reliability and soundness. Specifically, it “shall regulate and oversee the National Payments System as a whole and any of its components, in the public interest and in particular, promote competition in the market for payment services and the protection of payment system consumers.”
The section further details that the BoG shall have, among others, licensing powers for payment service providers and operators. In order to facilitate these roles, BoG is expected to establish the NPS to advise it. It also can establish, own, operate and participate in the ownership or operation of systems; hold cash accounts for operators and participants, which may be used for the clearing and settlement of transfers into a system; hold securities for operators and participants, which may be used for the working of systems; extend intraday credit to participants subject to adequate collateral being granted; and act as a central securities depositary for government securities, in conformity with Section 47 of the Bank of Guyana Act.
The bill also gives BoG the power to impose individual conditions for the operation of systems and the provision of services, to ask for information, and to agree with the individual operator or payments service provider on limitations in the activity or specific protective measures or impose sanctions and withdraw the relevant licence.
The explanatory memorandum noted that Part IV of the bill provides for the ongoing oversight by the bank, including the power to audit, have access to all records and information, examine and inspect where necessary for the oversight of systems and payment service providers.
The bill also provides for consumer protection.
Section 29 includes provisions for the transparency of fees charged by a payment service provider, while Section 30 provides that payment service providers should disclose the terms and conditions of a payment services in a manner clearly understood by the consumer, at the time the consumer contracts for the payment service. Section 31 sets out the complaints procedure.
The explanatory memorandum says Part VII of the bill sets out the guidelines regarding outsourcing and the use of agents, while Part VIII relates to settlement, netting and finality of payment. This latter part also applies to collateral used for providing liquidity in the system and is intended to protect against systemic risk and reflect international best practices for ensuring completion of daily operation.
Part IX of the bill, for the regulation of the effects of bankruptcy over licensed systems, is intended to ensure that the daily operations of a system duly overseen by the bank are protected from any liquidation or winding up procedure.
The legal recognition of electronic records and signatures is provided for in Part XI, where Section 48 provides that electronic funds transfers and records of electronic funds transfers are enforceable and may be used as evidence and Section 49 sets up additional conditions with which a payment service provider should comply to obtain a licence for the issuance of electronic money.
Part XII of the bill, the explanatory memorandum says, lays out infringements, administrative measures and penalties. Under the bill’s provision, the BoG has the power to withdraw licences or suspend activities of payment service providers or operators.
The final part of the bill sets out the provisions for the settlement of disputes by arbitration along with transitional provisions for existing entities providing a payment service or operating a system. Under this part of the bill, Section 53 provides for immunity from suit for supervisory staff of the BoG while Section 55 also provides that the bank may make such regulations, orders, notices or guidelines as may be required from time to time for carrying into effect the provisions of the bill.
BoG liquidity assistance
Meanwhile, Jordan also tabled amendments to the Bank of Guyana Act, which seek to explicitly give the BoG the power to provide temporary liquidity assistance to deposit taking financial institutions.
According to the explanatory memorandum of Bill No. 6 of 2018, the ability to provide this assistance “is an integral measure employed in maintaining the stability of the system.”
It further explains that Section 2 of the bill amends Section 40 of the Principal Act to expand the open market and credit operations of the bank to better reflect the monetary operations of a modern Central Bank, while Section 3 amends Section 41 of the Principal Act to explicitly allow the bank to grant, in exceptional circumstances, temporary liquidity assistance to financial institutions which take deposits against a wider range of collateral and for longer periods than what is accepted in the normal liquidity providing facilities. It also gives the bank the power to grant financial assistance where it is necessary to preserve the stability of the financial system and offers protection to the Bank of Guyana as it prescribes that all assistance in this instance requires a government guarantee.
Additionally, Section 5 of the bill amends Section 56 of the Principal Act to allow the bank to secure the credit granted to a financial institution on real property and to acquire such real property if the institution defaults. The bank, however, would be required to dispose of such property at the earliest suitable opportunity.
