By Kennedy Komba
2007
The purpose of this paper is to provide an effective oversight approach on payment systems in the MEFMI member states. In doing so, it is structured into two main parts; the first part is devoted to a situational analysis of the oversight function among the member states, while the second part provides for an effective approach in implementing oversight in the region.
To understand the existing state of the oversight function within the region, information was requested from all member countries through a structured questionnaire. The results of the analysis reveal that only 2 out of 13 member states have a clear separation of functions between the payment system oversight and operations function within the central bank. Despite this relative low oversight function implementation status, all member states appreciate the need to perform the oversight function for ensuring safe and efficient national payment systems.
A systematic approach towards oversight function is not visible in the countries performing an oversight function, which includes an application of the three pillars of oversight viz., clearly laid down Oversight objectives, defining the Scope of oversight and Activities of oversight. Only 3 out of the 13 countries have a policy document on oversight function. The other countries only use “experience” in conducting their oversight activities, defined as part of the overall function of the central bank in ensuring safety in the financial sector in its objective of financial stability.
It is only 2 out of 13 countries that have a dedicated department or unit that is distinct from the operations functions unit and which is manned by skilful staff. In the rest of the central banks, the oversight function is performed by the same staffs who are involved in operations with the reporting lines directed to the same head of operations.
In recommending an effective approach of oversight function for the MEFMI member states, a structured and phased implementation plan is recommended, that could be used by all Central banks in the region, depending on their level of payment systems development, availability of skilled human resources and financial resources.
For implementing an effective oversight function, a template framework and working manuals are provided in the paper for the use of central banks.