For the purposes of this Regulation:
‘payment system’ means a formal arrangement between three or more participants, not counting possible settlement banks, central counterparties, clearing houses or indirect participants, with common rules and standardised arrangements for the execution of transfer orders between the participants;
‘transfer order’ has the same meaning as defined in Article 2(i) first indent of Directive 98/26/EC;
‘systemic risk’ means the risk of a participant or the SIPS operator not meeting their respective obligations in a SIPS will cause other participants and/or the SIPS operator to be unable to meet their obligations when they become due, potentially with spillover effects threatening the stability of or confidence in the financial system;
‘SIPS operator’ means the legal entity legally responsible for operating a SIPS;
‘competent authority’ means the Eurosystem central bank with primary oversight responsibility identified as such pursuant to Article 1(2);
‘Eurosystem SIPS’ means SIPS owned and operated by a Eurosystem central bank;
‘legal risk’ means the risk arising from the application of law or regulation, usually resulting in a loss;
‘credit risk’ means the risk that a counterparty, whether a participant or other entity, will be unable to fully meet its financial obligations when they fall due or at any time in the future;
‘liquidity risk’ means the risk that a counterparty, whether a participant or other entity, will have insufficient funds to meet its financial obligations when they fall due, although it may have sufficient funds to do so in the future;
‘operational risk’ means the risk that deficiencies in information systems or internal processes, human error, management failures, or disruptions caused by external events or outsourced services will result in the reduction, deterioration or breakdown of services provided by a SIPS;
‘custody risk’ means the risk of incurring a loss on assets held in custody in the event of a custodian's or sub-custodian's insolvency, negligence, fraud, poor administration or inadequate recordkeeping;
‘investment risk’ means the risk of loss faced by a SIPS operator or participant when the SIPS operator invests its own or its participants' resources, e.g. collateral;
‘market risk’ means the risk of losses, in both on- and off-balance sheet positions, arising from movements in market prices;
[F1‘ deferred net settlement system ’ (DNS system) means a system in relation to which settlement in central bank money takes place on a net basis at the end of a predefined settlement cycle, e.g. at the end of, or during, a business day;]
‘cross-border collateral’ means collateral for which, from the perspective of the country in which the assets are accepted as collateral, at least one of the following is foreign: (a) the currency of denomination; (b) the country in which the assets are located; or (c) the country in which the issuer is established;
‘cross-border payment’ means a payment between participants established in different countries;
‘financial market infrastructure’ (FMI) means a multilateral system among participating institutions, including the system operator, used to clear, settle, or record payments, securities, derivatives, or other financial transactions;
[F1‘ direct participant ’ means a legal entity that has a contractual relationship with a SIPS operator, is bound by the relevant SIPS's rules, is allowed to send transfer orders to that system and is capable of receiving transfer orders from it;]
[F2‘ indirect participant ’ means a legal entity that does not have direct access to a SIPS's services and is typically not directly bound by the relevant SIPS's rules, and whose transfer orders are cleared, settled and recorded by the SIPS through a direct participant. An indirect participant has a contractual relationship with a direct participant. The relevant legal entities are limited to:
credit institutions as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (1) ,
investment firms as defined in point (1) of Article 4(1) of Directive 2004/39/EC of the European Parliament and of the Council (2) ,
any undertaking whose head office is outside the Union and whose functions correspond to those of a Union credit institution or investment firm, as defined in points (i) and (ii),
public authorities and publicly guaranteed undertakings, and central counterparties, settlement agents, clearing houses and system operators as defined in Article 2(c), (d), (e) and (p) of Directive 98/26/EC,
‘the Board’ means the administrative or supervisory board of a SIPS operator, or both, in accordance with national law;
‘the Management’ means executive directors, i.e. members of a unitary board who are engaged in the daily management of the SIPS operator and members of a managerial board of the SIPS operator in a dual board system;
‘relevant stakeholders’ means participants, FMIs that have an impact on the risk in a SIPS, and, on a case-by-case basis, other affected market actors;
‘credit exposure’ means an amount or value at risk that a participant will not settle for full value, either when due or at any time thereafter;
‘collateral’ means an asset or third-party commitment that is used by a collateral provider to secure an obligation vis-à-vis a collateral taker. Collateral includes both domestic and cross-border collateral;
‘liquidity provider’ means a provider of cash under Articles 5(3), 6(5), 8(1), 8(9) and 8(11) or assets under Article 8(4), including a SIPS participant or external party;
‘extreme but plausible market conditions’ means a comprehensive set of historical and hypothetical conditions, including the most-volatile periods that have been experienced by the markets the SIPS serves;
‘intended settlement date’ means the date that is entered into SIPS as the settlement date by the sender of a transfer order;
‘general business risk’ means any potential impairment of the financial position of the SIPS as a business concern as a consequence of a decline in its revenues or an increase in its expenses, such that expenses exceed revenues and result in a loss that must be charged against capital;
‘recovery plan’ means a plan developed by a SIPS operator to re-establish the smooth operation of a SIPS;
‘orderly wind-down plan’ means a plan developed by a SIPS operator for the orderly closure of a SIPS;
‘material’ qualifies a risk, a dependency and/or a change which may affect the ability of an entity to perform or provide services as expected;
‘relevant authorities’ means authorities who have a legitimate interest in accessing information from a SIPS to fulfil their statutory requirements, e.g. resolution authorities and supervisors of major participants;
‘principal risk’ means the risk that a counterparty will lose the full value involved in a transaction, i.e. either the risk that a seller of a financial asset will irrevocably deliver the asset, but not receive payment, or the risk that a buyer of a financial asset will irrevocably pay for, but not receive the asset;
‘custodian bank’ means a bank holding and safeguarding the financial assets of third parties;
‘settlement bank’ means a bank holding accounts with regards to payments, where the discharge of obligations arising from a payment system takes place;
‘nostro agent’ means a bank used by the participants in a SIPS for settlement;
‘one-sided payment’ means a payment involving only one funds transfer in one currency;
‘two-sided payment’ means a payment involving two funds transfers in different currencies in an exchange-for-value settlement system;
‘wrong-way risk’ means risk arising from exposure to a participant or issuer when the collateral provided by that participant or issued by that issuer is highly correlated with its credit risk;
‘business day’ has the same meaning as defined in Article 2(n) of Directive 98/26/EC[F1;]
[F2‘ independent director ’ means a non-executive member of the Board who has no business, family or other relationship that raises a conflict of interests regarding the SIPS or SIPS operator, their controlling shareholders, their management or their participants, and who has had no such relationship during the two years preceding their membership of the Board;
‘ affiliate ’ means a company that controls, or is controlled by, or is under control with, the participant. Control of a company is defined as (a) ownership, control or holding of 20 % or more of a class of voting securities of the company; or (b) consolidation of the company for financial reporting purposes;
‘ emergency situation ’ means an event, occurrence or circumstance that has the capacity to lead to the loss of or disruption to a SIPS's operations, services, or functions, including interfering with or preventing final settlement;
‘ financial obligations ’ means legal obligations arising, within the SIPS, between participants or between participants and the SIPS operator, as a consequence of transfer orders being entered into that SIPS;
‘ corrective measure ’ means a specific measure or action, regardless of its form, duration or gravity, that is imposed on a SIPS operator by a competent authority to remedy, or avoid a repetition of, non-compliance with the requirements of Articles 3 to 21.]
Textual Amendments
[F2Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 ( OJ L 176, 27.6.2013, p. 1 ).]
[F2Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC ( OJ L 145, 30.4.2004, p. 1 ).]
[F2Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC ( OJ L 337, 23.12.2015, p. 35 ).]
[F2Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC ( OJ L 267, 10.10.2009, p. 7 ).]