Narodowy Bank Polski

Payment System

Business continuity of payment and securities settlement systems infrastructure

  • Importance of payments system infrastructure's business continuity and central banks' responsibilities to ensure it
  • International initiatives in the area of payment and securities settlement systems business continuity
  • Actions related to ensuring business continuity of Polish payments and securities settlement systems infrastructure

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Importance of payments system infrastructure's business continuity and central banks' responsibilities to ensure it

* What is business continuity?

Business continuity is the state of uninterrupted operation of a given organisational unit achieved by the application of various organisational, technical and human resource measures which ensure the continuation of:

  1. all key business in the aftermath of a crisis,
  2. operation of the entire unit in case of sustained and severe disruptions resulting from a crisis.

* What is business continuity management?

Business continuity management consists in identifying the events which disrupt organisation's operation and in mitigating the risk of their occurrence. In case of a crisis, business continuity management should be focused on minimising potential losses and on fast resumption of operations by the organisation in line with procedures defined in advance in business continuity plan.

* Why is business continuity important?

In case of a crisis, each organisation, particularly financial institution, is exposed to disruptions in their performance. Usually, crisis is associated with the occurence of such events as fire, terrorist attack, power outage, software failure, etc. or events of wider range, e.g. a natural disaster, pandemics or a chemical, biological, radiological or nuclear accident. For an organisation, however, it is not the nature of the threat itself that is the most important but its effect, i.e. a sudden and unplanned interruption in the organisation's operation. Depending on the duration of this interruption, the organisation can suffer significant losses, in particular financial ones but also of other type, such as the damage of its reputation. In extreme cases the disruption of the organisation's business continuity can even threaten its further existence. In addition, disaster that affect one organisation may influence the security and effectiveness of other organisations. With regard to the above, business continuity management is not just an important element of an organisation's good practice but it became one of legal requirements, e.g. in relation to the financial institutions, which are required to minimise operational risks.

* Why is business continuity of payment and securities settlement systems infrastructure of crucial importance?

Assurance of business continuity of payment and securities settlement systems infrastructure has a tremendous impact on the financial system stability and on the country's economy, therefore its effectiveness and uninterrupted operations, irrespective of the circumstances, are a key issue.

* Why is the international co-operation in the area of business continuity of the payment and securities settlement systems infrastructure very important?

The existance of strong interrelations and interdependencies between payment and securities settlement systems infrastructures in the European Union countries results in a situation in which undesired effects of crises, e.g. natural disasters, pandemics, terrorist attacks or software failures causing disruptions in the operations of national critical infrastructure can also disturb smooth functioning of payment and securities settlement systems operations in other European Union countries. Therefore, there is a need to engage in co-operation and to carry out coordinated actions by supervisors, regulators and market participants for the benefit of business continuity of payment and securities settlement systems critical infrastructures.

* Why are the national central banks and the European Central Bank engaged in ensuring business continuity of payment and securities settlement systems' critical infrastructure and in co-operation between one another?

The concern to ensure business continuity of payment and securities settlement systems critical infrastructure derive from the central banks' tasks. The most important ones include:

  1. ensuring financial system stability,
  2. carrying out the monetary policy operations,
  3. oversight of payment systems and securities settlement systems,
  4. operating payment systems and central securities depositories.

Co-operation, and in particular information sharing between the national central banks and the European Central Bank (ECB) is in the context of the development of a single financial market of the European Union, implementation of the single monetary policy tasks and development of international payment and securities settlement system infrastructures (e.g. TARGET2 - Trans-European Automated Real-Time Gross Settlement Express Transfer) required in order to ensure business continuity of payment and securities settlement systems infrastructures in the European Union.

Promoting sharing information related to business continuity by central banks constitutes a necessary measure to prepare market participants adequately to maintain the business continuity of operations in crisis.

The European System of Central Banks (ESCB) promotes the information sharing, because:

  1. the exchange of experience gathered while implementing the national, European and world-wide standards can contribute to the further strengthening of market structures in Europe, by the increase in the bilateral information sharing and mutual understanding,
  2. it is possible to obtain consistent, updated and easily accessible information on the standards or initiatives undertaken in relation to the business continuity in the Eurosystem and in the non-euro area as well as information on the domestic requirements imposed by central banks in the European Union and corresponding market regulations,
  3. it allows to set up the tool to coordinate actions in case of global and undesired events.

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International initiatives related to payment and securities settlement systems business continuity

* The initiative of the European System of Central Banks relating to business continuity of payment and securities settlement systems' critical infrastructures in the European Union.

The ESCB undertook the initiative to coordinate business continuity of payment and securities settlement systems critical infrastructures, which was launched at the conference "Market infrastructures' business continuity in an integrated euro area - possible needs for interaction and coordination" organised by the ECB on 25-26 September 2006.

As a follow-up of this conference the Payment and Settlement Systems Committee (PSSC) composed of European Union central bank representatives established two working groups, one of which focuses on organising tests for payment and securities settlement systems critical infrastructure business continuity at the EU level. The second one focuses on organising channels for confidential and public information sharing as well as on the assessment of domestic supervisory and market standards in this area.

One of the effects of this work is the establishment of tabs to the ECB website by all the central banks in the European Union on the business continuity of payment and securities settlement systems infrastructures. Links to these sections are accessible at the ECB website at the address:

www.ecb.europa.eu/paym/pol/bc/html/index.en.html

The aforementioned website familiarizes the user with the idea of business continuity, it includes links to the national sections of central banks in the European Union and it indicates the sources of international standards and initiatives.

* International standards related to business continuity applicable to the payment and securities settlement systems

Business continuity of payment and securities settlement systems became the subject of many international standards and recommendations, including the EU ones. Broader information on these standards and recommendations is included in the abovementioned tab to the ECB website.

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Actions related to ensuring the business continuity of the Polish payment and securities settlement systems infrastructure

* Actions of Narodowy Bank Polski (NBP)

With regard to the participation of the NBP in TARGET and the obligation to fulfil the requirements related to the security of this system defined by the ECB, the NBP prepared the business continuity plan for the payments system, which constitutes an element of the NBP comprehensive business continuity plan. Motivation to develop the business continuity plan consisted not only in the requirements arising from the legal regulations but, most of all, in the awareness that the control of this area has a positive effect on the value of organisation, its reputation and the possibility to achieve the objectives set for the central bank.

Business continuity plan covers significantly important NBP tasks arising from the Act on the NBP or international commitments which should be fulfilled in a continuous and uninterrupted manner.

In order to review the completeness and adequacy of adopted emergency procedures various tests and exercises are carried out several times a year, also with the participation of external institutions, such as the National Depository for Securities (Krajowy Depozyt Papierów Wartościowych S.A. - KDPW S.A.), the National Clearing House (Krajowa Izba Rozliczeniowa S.A. - KIR S.A. ) and banks.

In addition, NBP actively co-operates within the aforementioned ESCB initiative related to the business continuity of critical payment system infrastructures in the EU.

* Actions of the National Depository for Securities

KDPW S.A., as an operator of the deposit-settlement-clearing system of financial instruments, developed and implemented the Operational Business Continuity System aimed at minimising risks for the whole KDPW capital group. Detailed information on this initiative can be found at the KDPW S.A. website at the address:

http://www.kdpw.pl/en/kdpw/organisation/Pages/busCon.aspx

* Actions of the National Clearing House

KIR S.A., as an operator of the inter-bank settlements system ELIXIR and because of the key importance of this system in the national payments system, developed and implemented Business Continuity Plan (BCP) and business continuity management system (BCMS). The BCP takes into account the ECB requirements related to the survival strategy and catastrophe scenarios for the systemically important payment systems and its implementation was based on the methodology developed by the Disaster Recovery Institute International. An Additional confirmation of the compliance of the ELIXIR system with the ECB requirements can constitute obtaining of the international certificate BS 25999-2:2007 Business Continuity Management System. In addition, KIR S.A. for the purpose of monitoring and reviewing the BCP and the BCMS regularly organises:

  1. operational tests of critical IT infrastructures (once a quarter),
  2. table top exercises,
  3. periodical reviews of the PCD documentation (twice a year).




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