Nepal Rastra Bank Publishes Systemically Important Payment Systems (SIPS) Framework
Author
NEPSE TRADING
Nepal Rastra Bank (NRB) has published the Systemically Important Payment Systems (SIPS) Framework to identify critical payment systems and mitigate risks associated with them.
Issued under the authority of the Payment and Settlement Act, 2019 (2076), the framework aims to align Nepal’s payment systems with international standards, ensuring systemic stability and effective risk management.
Purpose and Definition
The framework defines SIPS as payment systems whose disruption could significantly impact the overall financial system. Transactions requiring immediate settlement, those subject to penalties in case of delays, and large-value payments fall under this category.
It also highlights the interconnectivity of such systems with other banks, financial institutions, and service providers, making them critical for financial stability.
Criteria and Obligations
The framework specifies five criteria for identifying SIPS. Any system meeting these benchmarks will be designated as systemically important. NRB retains the authority to review and revise these criteria as needed.
Designated SIPS must fulfill strict obligations, including:
Ensuring a strong legal foundation and adherence to settlement rules.
Managing credit, liquidity, operational, and business risks.
Conducting mandatory annual stress tests.
Guaranteeing timely settlements and effective governance.
Informing NRB of any significant operational or structural changes.
Self-Assessment and Transparency
Designated SIPS must conduct annual self-assessments against international standards and share the results.
They are also required to publicly disclose governance and risk management policies, develop crisis management protocols, and ensure mechanisms to safeguard financial stability.
NRB’s Payment Systems Department will carry out annual evaluations of these systems, while licensed institutions must also perform self-assessments.
Implementation and Review
The list of designated SIPS will be published on NRB’s official website. The framework will be reviewed every two years—or sooner if necessary—to address emerging risks and new technologies.
