Title VIII Overview: Payment, Clearing, and Settlement Supervision

American Bankers Association Contact

Steve Kenneally  (202) 663-5147

Dechert LLP Authors

Thomas P. Vartanian (202) 261-3439
Robert H. Ledig (202) 261-3454
David L. Ansell (202) 261-3433
Corey F. Rose (704) 339-3164


Summary

Title VIII – Payment, Clearing, and Settlement Supervision. Consistent with the systemic focus and risk-based approach of Title I, Title VIII establishes a framework for a systemic approach to ensuring the stability of the payment, clearing and settlement systems. In Title VIII Congress has given broad discretion to Federal regulators to determine what measures are necessary to ensure the sound functioning of these systems. Title VIII has two principal prongs. The first prong addresses parties that operate or manage multilateral systems for the purpose transferring, clearing, or settling payment, securities, or other financial transactions among or financial institutions or between financial institutions and the system operator. These system operators are referred to as financial market utilities ("Utilities"). It is clear that these parties will be subject to enhanced regulation and supervision. The second prong of Title VIII involves financial institutions that participate in the payments, clearing or settlement system ("Participants"). The impact of Title VIII on Participants is not at all clear at this point. It will ultimately depend on three principal factors:

  • First, whether a particular payment, clearing, settlement system will be deemed to be systemically important;
  • Second, what threshold of activity will be established to subject Participants to regulation as a result of their role in a systemically important system ("Covered Participants");
  • Third, what types of requirements will be imposed on a Covered Participant.

In the case of Title VIII, determinations made by regulators and the rulemaking process will play a critical role in deciding the ultimate impact of the broad mandate that has been given to Federal regulators in protect the stability of payment, clearing and settlement systems on Utilities and Participants.

The following links provide expanded analysis within this section: