At its recent meeting, the Payments System Board considered a number of issues including the reform of the ATM system, disclosure arrangements for equities securities lending, the oversight of overseas central counterparties, and restrictions imposed on merchants by PayPal.
1. Reform of the ATM System
The Bank is releasing an Access Regime that will support the industry-based reforms to the ATM system. These reforms, which will come into effect on 3 March 2009, will:
– make the cost of cash withdrawals more transparent to cardholders and place downward pressure on the cost of ATM withdrawals;
– help to ensure continued widespread availability of ATMs by creating incentives to deploy them in a wide variety of locations, providing consumers with choice and convenience;
promote competition between financial institutions; and
– make access less complicated for new entrants, and therefore strengthen competition.
The Board emphasises that the reforms are designed to make the pricing model for ATMs more transparent and responsive to competitive forces. The Bank will be monitoring developments in foreign fees and direct charges over coming months and will report publicly on developments.
2. Disclosure of Equities Securities Lending
Over the past year the Bank has been working with participants in the equities securities lending market to improve transparency. As a result of this work, in October 2008 the Bank released a Consultation Document setting out a proposed variation to the Bank’s Financial Stability Standard for Securities Settlement Facilities to require greater disclosure by the ASX. The Board is proceeding with this variation, although following the latest round of consultation it has made some minor changes to the originally proposed drafting.
Key features of the new disclosure regime include the following:
– ASX will require all transactions related to securities loans to be ‘tagged’ when they are submitted for settlement. This will be implemented in early October 2009, after the required system changes have been made;
– participants in the settlement facility will be required to report outstanding securities borrowed and loaned directly to ASX; and
– ASX will publish data on securities loan transactions and the stock of loans outstanding on a daily basis.
There will be a phased approach to implementation of the direct reporting requirement. A pilot will commence at the end of April, with full implementation by the end of December 2009. During the pilot phase the Bank will work with the industry to encourage those entities that are significant players in the securities lending market, but are not settlement participants, to participate in the reporting arrangements.
3. Overseas Central Counterparties
The Bank is also releasing revised arrangements for the regulation of overseas central counterparties that operate in Australia. Under the new arrangements, an overseas central counterparty that is subject to a ‘sufficiently equivalent’ overseas regulatory regime, and is able to provide documentary evidence from the overseas regulator that it meets the requirements of that regime, will be exempt from the Standard.
Where an overseas central counterparty is not subject to formal assessment against the Standard, it will still be required to provide regular data and information to the Bank. In the Board’s view, this regime provides an appropriate balance between ensuring the safety and robustness of central counterparties operating in Australia and avoiding the costs associated with unnecessary regulation.
The Reserve Bank will publish an annual assessment of any overseas facilities operating in Australia, including of the facilities’ obligation to address systemic risk. In addition, the Reserve Bank will work with ASIC to establish guidance on how ‘sufficient equivalence’ of an overseas regulatory regime will be assessed.
4. PayPal’s Merchant Restrictions
As indicated earlier, the Board has been considering PayPal’s and eBay’s rules that prohibit merchants from surcharging customers for the use of PayPal and from discouraging the use of PayPal.
The Board’s view is that no-surcharge rules can limit merchant choice and competition and can be detrimental to the efficiency of the payments system as a whole, particularly where merchants’ ability to decline acceptance of a particular payment instrument is constrained. Notwithstanding this view, PayPal is a relatively small player in the online market – outside of eBay, most merchants are able to decline acceptance of PayPal if the benefits of accepting it do not outweigh the costs of the restrictions. At this time, therefore, the Board is not convinced that the benefits of imposing regulation to remove the rule would outweigh the costs.
This assessment may change over time, particularly if the PayPal system grows significantly. PayPal has indicated to the Bank that it accepts that if it were to increase in size substantially, its no-surcharge rule would need to be removed for consistency with other payment systems. It has also indicated to the Bank that it will not increase its standard published fees for eBay sellers for a period of two years.
The Board has also considered eBay’s rule that mandates acceptance of PayPal by sellers on eBay. In the Board’s view this rule, combined with the no-surcharge rule, is undesirable and limits competition between payment systems.
Finally, the Board has been assured that eBay and PayPal’s current ‘no discouragement’ rules do not prevent sellers from expressing a preference for an alternative payment system. It will re-examine this issue if it becomes apparent that the ‘no discouragement’ policies are being implemented in such a way as to prevent sellers from exercising choice.
D.C.