Collaborations are a central pillar, both in the field of regulation and in the fields of assessment and audit.
The Payment Systems Oversight Division works in cooperation with other supervisory authorities and with various entities that impact on the activity of controlled payment systems. These include authorities within the Bank of Israel such as the Banking Supervision Department, and Israeli authorities such as the Israel Securities Authority, the Competition Authority, the Capital Market Authority, the Ministry of Finance, the Ministry of Justice, and the Israel National Cyber Directorate. In addition, the Payment Systems Oversight Division maintains regular contact with the operators of the systems and the various entities participating in the payment systems, which possess the knowledge and expertise necessary to implement the standards and principles, in accordance with the needs of the local market.
In addition to cooperation with the various entities operating in Israel, the Payment Systems Oversight Division collaborates with various international entities and parallel supervisory authorities in the world, to receive information and learn about the implementation of the international standards applicable to the various payment systems. The collaboration is also necessary to fulfill the function of assessment and audit. For example, the Payment Systems Oversight Division works together with the international group for supervision of the CLS.
Cooperation with international entities
The payment systems oversight maintains regular working relationships with corresponding entities in various central banks and strives to strengthen and promote its relations with additional major international entities, including the Bank for International Settlements (BIS), the CPMI Committee, the European Central Bank (ECB) and other central banks in the world, as well as experts from the World Bank and the International Monetary Fund (IMF), who take part in establishing the principles and standards in the field of financial market infrastructure in general and in the field of payment systems oversight in particular.
Collaboration with the Banking Supervision Department
The Payment Systems Oversight Division works in cooperation with the Banking Supervision Department at the Bank of Israel. The cooperation takes place on two levels:
On the first level—cooperation in connection and access to the payment systems, for the entities supervised by the Banking Supervision Department. The cooperation includes recognition of the tests carried out by the Banking Supervision Department to approve the entry of those entities into activity in the system.
On the second level—joint supervision of payment systems that constitute both an "auxiliary corporation" and a controlled payment system.
Memorandum of Understanding with the Israel Securities Authority
Despite being payment systems, Section 2 of the Payment Systems Law excludes the possibility of declaring the Stock Exchange Clearing Houses as controlled payment systems.
In accordance with the Securities Law, 5728-1968, the Israel Securities Authority supervises the Stock Exchange Clearing Houses. The Stock Exchange Clearing Houses participate in the Zahav system, which is supervised by the Bank of Israel and they are part of the payments system array in Israel.
To coordinate and share information regarding the activities of the Stock Exchange Clearing Houses and to clarify the areas of responsibility between the Israel Securities Authority and the Payment Systems Oversight at t the Bank of Israel, a memorandum of understanding was signed between the authorities. Its purpose is to promote efficient, fair, uniform and coordinated supervision, to strengthen the stability and efficiency of the payment systems in Israel.
In accordance with the memorandum, there is cooperation and information sharing between the entities, and a coordinating committee was established to oversee payment and settlement systems, which will allow the transfer of information between the two regulators regarding the stock exchange clearinghouses (the Securities Exchange Clearing House and the Derivatives (MAOF) Clearing House).
The Shva and MASAV companies, which operate the retail payment systems, are defined by the Competition Authority as collaborations between competitors that amount to binding arrangements. Therefore, the activity of each of them is subject to Restrictive arrangements, under the conditions set by the Director-General of the Israeli Competition Authority. The exemption arrangements given to each company individually are for a limited period that is renewed from time to time. The Competition Authority and the Payment Systems Oversight Division maintain working relationships and hold periodic meetings, where various issues related to competition or affecting competition in the market of means of payment and payment systems are discussed.
Joint oversight of the CLS system
The CLS system is a payment system that settles Israeli currency in Israel against other foreign currencies, and is an integral part of the payment system in Israel. The system operates in Israel and in many other countries. In accordance with the authority of the Governor of the Bank of Israel in the Payment Systems Law regarding systems that operate, in whole or in part, outside of Israel, the Governor declared the CLS system as a "designated controlled" system.
With the shekel joining the CLS system in 2018, the Bank of Israel joined the International Oversight Committee for the CLS system. The supervisory group includes 18 representatives from all the central banks linked to the CLS, and it is led by the US Federal Reserve, which periodically publishes an evaluation report on the CLS's compliance with international principles.
As the CLS system is effectively supervised by another entity, and in view of the oversight entity having a representative of the Bank of Israel, the Governor exempted the CLS system from complying with certain sections of the Payment Systems Law.
Exemption for the CLS system from various provisions and an amendment to the exemption regarding Section 17. (HEBREW)
Cooperation with the Israel National Cyber Directorate
The Critical State Infrastructure Division (CMI) in the Israel national cyber directorate guides, in accordance with the Security Regulation Law, 5758-1998, entities that are declared as “essential computerized systems” in aspects of cyber defense.
In 2016, as part of the amendment to the law regulating security in public entities, the Bank of Israel was added to the list of entities listed in the fifth supplement to the law. That is, the Bank of Israel, being the operator of the ZAHAV system, was defined as a "critical state infrastructure" (CSI). As a result, the Bank of Israel is guided, in aspects of cyber protection, directly by the National Cyber Directorate.
On November 10, 2019, the Steering Committee for the Protection of Essential Computerized Systems decided that the payment systems operated by the Shva and MASAV companies would be defined as “Critical State Infrastructures” (CSI). Following this decision, an order to regulate security in public bodies (change the second, third and fifth addendums to the law), 5782-2022 included Shva and MASAV in the list in the fifth addendum to the law regulating security in public entities. Accordingly, the Shva and MASAV companies are guided, in aspects of cyber protection, directly by the national cyber directorate.
The Payment Systems Oversight Division at the Bank of Israel and the National Cyber Directorate collaborate on aspects of cyber protection, with a shared goal of strengthening the resilience of the payment systems operated by Shva and MASAV against cyber threats.
Memorandum of Understanding with the Capital Market Authority
To increase competition in the payments market in Israel, the Payment Systems Oversight Division reached agreements with the Capital Market Authority, according to which entities supervised by the Capital Market Authority will be able to operate in the controlled payment systems, provided that these entities comply with the relevant requirements regarding their activity in the payment services field. The framework of the understanding at this stage will apply to financial asset service providers that are supervised by the Capital Market Authority. The Bank of Israel is examining the future opening of the payment systems to additional entities that are supervised by the Capital Market Authority.
The opening of the payment market to fintech will allow consumers and businesses to benefit from innovative and efficient services that will begin to operate in Israel.
Memorandum of Understanding with the Ministry of Communication
The Postal Bank, which operates as a participant in some of the controlled payment systems in Israel, is supervised by the Ministry of Communication in accordance with the Postal Law, 1986. To coordinate the oversight work, between the Bank of Israel and the Ministry of Communication, the work processes and collaboration between the Payment Systems Oversight Division and the Ministry of Communication were arranged. This collaboration was initiated with the common goal of ensuring the proper, stable and efficient operation of the Postal Bank in the controlled payment systems.