Initial self-assessment

Reporting and Disclosure Requirements
Associated with the Policy on Payments System Risk (PSR Policy)
(FR 4102; OMB No. 7100-0315)

Description of Information Collection
The Federal Reserve adopted several revisions to Part I of its PSR Policy
addressing risk management in payments and settlement systems. Specifically, the
Federal Reserve (1) incorporated into the PSR Policy the Recommendations for CCP as
the Federal Reserve’s minimum standards for central counterparties, (2) clarified the
purpose of Part I of the policy and revised its scope with regard to central counterparties,
and (3) established an expectation that systemically important systems (subject to the
Federal Reserve Board’s authority) disclose publicly self-assessments against the Core
Principles, Recommendations for SSS, or Recommendations for CCP, as appropriate,
demonstrating the extent to which these systems meet the principles or minimum
standards.
The Federal Reserve believes that the effective implementation of these principles
and minimum standards by systemically important systems can foster greater financial
stability in payments and settlement systems. Users and others commonly are interested
in understanding how these systems function in order to manage their risks.
In the past, different disclosure practices and requirements for payments and
settlement systems resulted in varying levels of information being disseminated to users
of the systems and other interested persons. Users and persons outside the user
community (such as prospective users or other public authorities) found it difficult to
obtain sufficient information to understand and assess a particular system’s approach to
risk management against internationally accepted principles and minimum standards.
Broadening the availability of information concerning a system’s risk management
controls, governance, and legal framework, for example, could assist those interested in a
system in evaluating and managing their risk exposures.
It is the Federal Reserve’s opinion that operators of systemically important
systems are well-positioned to assess and demonstrate the extent to which they have
implemented the principles or minimum standards of the PSR Policy. Therefore, in
furtherance of policy objectives, it is expected that systemically important systems
subject to Federal Reserve authority complete comprehensive, objective self-assessments
against the applicable principles or minimum standards in the PSR Policy and disclose
publicly the results of these efforts. Adopting this self-assessment framework, however,
does not preclude the Federal Reserve from independently assessing compliance of
systemically important systems with relevant rules, regulations, and Federal Reserve
policies.
The Federal Reserve expects systemically important systems subject to its
authority to complete self-assessments based on the following guidelines.

Self-Assessment Review, Approval, and Disclosure
First, systemically important systems are expected to document the basis for their
self-assessment and support any conclusions regarding the extent to which they meet a
particular principle or minimum standard. 1 The Federal Reserve notes that the CPSS and
CPSS-IOSCO have developed implementation measures and assessment methodologies
that can assist system operators in structuring their self-assessments. 2 Accordingly,
payment system operators are encouraged to consult Section 7 of the Core Principles for
guidance when developing their self-assessments and in measuring the extent to which
the system meets each principle. Likewise system operators for securities settlement
systems and central counterparties are encouraged to consult the assessment
methodologies for the relevant minimum standards for further guidance on each
minimum standard and are encouraged to respond to the key questions included therein. 3
Second, to further ensure system accountability for accuracy and completeness,
the system’s senior management and board of directors are expected to review and
approve self-assessments upon completion. Third, to achieve broad disclosure, the
system is expected to make its self-assessments readily available to the public, such as by
posting the self-assessment on the system’s public website. Finally, in order for selfassessments to reflect correctly the system’s current rules, procedures, and operations, a
systemically important system is expected to update statements in the self-assessment
following material changes to the system or its environment. At a minimum, a
systemically important system should review its self-assessment biennially to ensure
continued accuracy.

1

System operators should use one of the following assessment categories to describe the extent to which the system
meets a particular principle or minimum standard: observed, broadly observed, partly observed, or non-observed. The
assessment should contain information robust enough to enable users and other interested persons to independently
assess the risks associated with the system. The Federal Reserve, however, does not expect payments and settlement
systems to disclose publicly sensitive information that would expose system vulnerabilities or otherwise put the system
at risk (e.g., specific business continuity plans).
2
The World Bank and International Monetary Fund have published a handbook of guidance for completing
assessments against various international standards, including the Core Principles. See
http://www.imf.org/external/pubs/ft/fsa/eng/index.htm. In November 2002, CPSS-IOSCO published an Assessment
Methodology for the Recommendations for SSS available at http://www.bis.org/publ/cpss51.htm. In November 2004,
CPSS-IOSCO published the CCP Recommendations and an Assessment Methodology available at
http://www.bis.org/publ/cpss64.htm.
3
The assessment methodologies for the CPSS-IOSCO Recommendations include key questions to assist an assessor in
determining to what extent a system meets a particular minimum standard.