Opinion of the European Central Bank of 17 December 2019 on payment services and payment systems (CON/2019/45)

OPINION OF THE EUROPEAN CENTRAL BANK of 17 December 2019 on payment services and payment systems (CON/2019/45) Introduction and legal basis

On 11 November 2019 the European Central Bank (ECB) received a request from the Bulgarian Minister for Finance for an opinion on a draft law amending the Law on payment services and payment systems and other laws (hereinafter the ‘draft law’) . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the fifth indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to payment and settlement systems. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The consulting authority explains that the draft law aims to transpose into national law the Corrigendum to Directive (EU) 2015/2366 of the European Parliament and of the Council , and to implement certain measures of other Union legal acts adopted in connection to Directive (EU) 2015/2366, notably Regulation (EU) 2019/518 of the European Parliament and of the Council . 1.2 According to the consulting authority, the draft law also includes measures to extend and strengthen the supervision of payment services and payment systems. 1.3 Thus, the draft law provides that any person acquiring a minimum of three percent of the shares of or voting rights in a payment institution or an electronic money institution authorised by Българска народна банка (BNB, Bulgarian National Bank) shall notify BNB within seven days thereof and submit the required information. In the event of an incomplete submission of information, or if BNB considers the influence exercised by a shareholder is likely to be detrimental to the soundness and

security of that institution or the payment services provided by it, BNB is empowered to temporarily suspend the voting rights of that person and/or to order them to divest those shares within 30 days. 1.4 The draft law further provides that payment service providers must charge payment service users equal fees for cross-border payments in euro within the Union and for payments in Bulgarian lev within Bulgaria which are of equal value and have identical characteristics in terms of initiating, executing and settling the payment. 1.5 The draft law provides that (i) the clearing and settlement of payment transactions in Bulgarian lev related to card payments shall take place in settlement finality systems that process card-based payment transactions and (ii) the net settlement of the same payment transactions shall take place in the real-time gross settlement system (RTGS) operated by BNB (RINGS) when both of the following conditions are met: (a) the payment card issuers are payment services providers authorised by BNB or are branches of payment services providers within the territory of Bulgaria and (b) the point of sale or the automated teller machine (ATM) is within the territory of Bulgaria. 1.6 The draft law also provides for a number of other miscellaneous amendments, including periodic reporting by payment service providers that benefit from a licence exemption; more detailed rules regarding the exemptions from strong customer authentication, as laid down in Commission Delegated Regulation (EU) 2018/389 ; and an extended statute of limitations for the investigation of breaches of the Law on payment services and payment systems and increased administrative penalties for such breaches.

2. Specific observations

2.1 The ECB notes that when the two conditions mentioned in paragraph 1.5 are fulfilled, the clearing and settlement of such payment transactions will always be done by an operator of a settlement finality system with access to RINGS. The ECB understands that this restriction regarding cardbased payment transactions in Bulgarian lev is aimed at ensuring that such retail payments, which are deemed to be closely linked to the territory of Bulgaria, are cleared and settled in central bank money through RINGS. This restriction should be considered in the light of the principle of open and non-discriminatory access to payment systems, as enshrined in Union legislation and in international standards . In this regard the ECB understands that the restriction would not hamper cross-border acquiring of card-based payment transactions denominated in Bulgarian lev. To this end and for the purpose of cross-border acquiring of card-based payment transactions, the participation of payment service providers that (a) are authorised in other Member States and (b)

provide payment services in Bulgaria without a branch into settlement finality systems that process card-based payment transactions and perform net settlement in RINGS should not be prohibited and non-discrimination of the payment system participants should be ensured. 2.2 The ECB moreover understands that the same restriction aims to support the transposition of Directive (EU) 2015/2366 into national law with a view to reinforcing the protection of consumers from potential additional charges stemming from unexpected currency conversions related to the processing of card-based payment transactions mentioned in paragraph 1.5. In this regard, the ECB notes that Directive (EU) 2015/2366 already contains rules on currency conversion and information on charges , which the ECB understands were already transposed by the Law on payment services and payment systems . 2.2 Although credit institutions (alongside payment institutions and electronic money institutions) are considered payment services providers for the purposes of the Law on payment services and payment systems , the ECB understands that acquisitions of shares or voting rights in credit institutions by any person will fall outside the scope of the notification requirement as laid down in the draft law regarding the acquisition of a certain shareholding in payment institutions and electronic money institutions . Such acquisitions of shares or voting rights in credit institutions are already regulated in the Bulgarian Law on credit institutions . 2.3 Finally, the ECB understands that the proposed amendment regarding the charges for cross-border payments in euro within the Union is intended to avoid any possible conflicts between the existing Law on payment services and payment systems and Regulation (EC) No 924/2009 as amended by Regulation (EU) 2019/518 .

This opinion will be published on the ECB’s website.

Done at Frankfurt am Main, 17 December 2019.

[signed]

The President of the ECB

Christine LAGARDE