Article 9 Governance

1.   A SIPS operator shall have documented objectives which place a high priority on the safety and efficiency of the SIPS. The objectives shall explicitly support financial stability and other relevant public interest considerations, in particular open and efficient financial markets.

2.   A SIPS operator shall have effective and documented governance arrangements that provide clear and direct lines of responsibility and accountability. These arrangements shall be made available to the competent authority, owners and participants. The SIPS operator shall make abridged versions thereof available to the public.

3.   The Board’s roles and responsibilities shall be clearly defined. The Board’s roles and responsibilities shall include all of the following:

4.   Except for Eurosystem SIPS, the Board shall review both its overall performance and the performance of its individual Board members at least annually.

5.   The Board’s composition shall ensure integrity, and, except in the case of a Eurosystem SIPS, an appropriate mix of technical skills, knowledge and experience both of SIPS and of the financial market in general, allowing the Board to fulfil its roles and responsibilities. The composition shall also take into account the allocation of competences in accordance with national law. Except for Eurosystem SIPS, and if permitted by national law, the Board shall include non-executive board members, including at least one independent director.

6.   The Board shall establish and oversee a documented risk-management framework, which shall:

The Board shall establish a risk committee to assist it in discharging its risk-related responsibilities. The risk committee shall advise the Board on the SIPS’s risk management.

The Board shall ensure that there are three clear and effective lines of defence (operations, risk management and internal audit), which are separate from each other and have sufficient authority, independence, resources and access to the Board.

7.   The Board’s approval shall be required for decisions that have a significant impact on the SIPS’s risk profile and for the key risk documents governing the SIPS’s operations. As a minimum, the Board shall approve and annually review the comprehensive risk management framework referred to in Article 10(1), the recovery and orderly wind-down plan and the capital plan referred to in Articles 10(4) and 18(6) respectively, the frameworks on credit and liquidity risk referred to in Articles 11(1) and 13(1) respectively, the collateral framework that governs the management of risks referred to in Article 12, the SIPS’s investment strategy referred to in Article 19(4), the operational risk framework and the associated business continuity plan referred to in Articles 20(1) and 20(6) respectively, the cyber resilience framework and strategy referred to in Article 21(1), and the outsourcing framework referred to in Article 22(4).

8.   The Board shall ensure that major decisions affecting the SIPS’s technical and functional setup, rules and overall strategy, in particular, with regard to the choice of a clearing and settlement arrangement, operating structure, scope of products cleared or settled, and use of technology and procedures, appropriately reflect the legitimate interests of the SIPS’s relevant stakeholders. The relevant stakeholders and, where appropriate, the public shall be consulted reasonably in advance on such decisions.

9.   The role and responsibilities of the Management, and where applicable, the Branch Management, as well as the reporting lines within the Management, and where applicable the Branch Management, and the reporting lines between the Management and the Board, and where applicable the Branch Management and the board of the legal entity of which the branch is a legally dependent part, shall be clearly defined. The Management’s composition, and where applicable the Branch Management’s composition, shall ensure personal integrity and an appropriate mix of technical skills, knowledge and experience both of SIPSs and of the financial market in general, allowing them to fulfil their responsibilities for the operation and risk management of the SIPS operator.

10.   The Management, under Board direction, and where applicable the Branch Management, under the direction of the board and the management of the legal entity of which the branch is a legally dependent part, shall be responsible for ensuring all of the following:

11.   Where a branch is identified as a SIPS operator:

For the purpose of point (b) ‘members of the management’ means, in a unitary board system, the members of the Board engaged in the daily management of the legal entity and any other executive officers appointed by the Board who are engaged in the daily management of the legal entity or, in a dual board system, the members of the management board and any other executive officers appointed by the Board or by the management board who are engaged in the daily management of the legal entity.

12.   A SIPS operator when ensuring compliance with the requirements on integrity under paragraphs 5 and 9 shall consider whether the members of the Board and the Management, and where applicable the Branch Management, of a SIPS operator have a record in respect of convictions or penalties for breaches of the applicable commercial law, insolvency law, financial services law, anti-money laundering law and/or counter-terrorist financing law and breaches of professional duty as well as for fraud.