Systemically Important Payment System (SIPS)

SIPS stands for systemically important payment system. It is a payment system whose failure or disruption could spread to banks, markets and the wider economy. Because of that risk, central banks hold these systems to stricter oversight than an ordinary payment scheme.

Where do the SIPS standards come from?

The international baseline is the Principles for Financial Market Infrastructures (PFMI). The Committee on Payment and Settlement Systems (now the Committee on Payments and Market Infrastructures, or CPMI) and the International Organization of Securities Commissions (IOSCO) published them in 2012, replacing the Core Principles for Systemically Important Payment Systems that central banks had used since 2001. The PFMI are standards, not law. Each authority applies them through its own rules.

How are SIPS regulated in the EU?

The European Central Bank (ECB) applies the PFMI through Regulation (EU) No 795/2014, usually called the SIPS Regulation. It covers large-value and retail payment systems, whether a central bank or a private company operates them. The ECB's Governing Council decides which systems qualify and reviews the list every year. A designated operator has to meet requirements on governance, credit and liquidity risk, settlement finality, operational risk and recovery planning.

Other central banks use the same label. The Saudi Central Bank (SAMA), for example, classifies systems as SIPS and requires their operators to follow its SIPS rules from the date they are notified.

Can a stablecoin be a SIPS?

It can be treated like one. In July 2022, CPMI and IOSCO said that a stablecoin arrangement that transfers coins between holders is a financial market infrastructure. If authorities find it systemically important, it is expected to observe all relevant PFMI principles, just as a traditional payment system would. Their guidance also presses stablecoin arrangements to define the exact point at which a transfer becomes final. That is harder on public blockchains, where settlement is probabilistic.

How are SIPS different from G-SIBs?

A SIPS designation applies to the system that moves the money. A G-SIB designation applies to a bank. Neither one changes the obligations of the institutions sending payments through the system. Banks and virtual asset service providers still carry their own Travel Rule obligations under R.16 for the transfers they make.

Related terms: G-SIB, Payment Service Provider (PSP), Travel Rule, R.16.