BoE finalizes binding governance code for payment systems

The Bank of England has developed a binding code for recognised payment system operators (RPSOs) under Section 189 of the Banking Act 2009.

This code provides transparent minimum requirements for governance frameworks, ensuring RPSOs act as systemic risk managers.

It mandates that RPSOs' objectives support financial stability and that boards approve robust risk management frameworks.

The accompanying Supervisory Statement (SS) offers non-binding guidance on how the Bank expects compliance, allowing RPSOs flexibility to demonstrate adherence in ways appropriate to their business.

The framework is based on international standards like the PFMI and the UK Corporate Governance Code.

The code was implemented on 21 June 2018.

The Bank received thirteen responses to its consultation, which were largely supportive, with most comments focusing on points of detail.

Key amendments include explicitly retaining a reference to financial stability in RPSO objectives and requiring boards to understand end-to-end risks.

On board composition, the Bank maintains the expectation that a minimum of one-third of the board comprises independent non-executive directors (INEDs).

This approach balances independence with diverse expertise, reflecting common RPSO board structures.

The Supervisory Statement also clarifies that board sub-committees should be chaired by a non-executive director, with risk and governance committees specifically chaired by an INED.

Mechanisms for reviewing the chair's performance, including an accountable senior INED, are also required.