The Reserve Bank has updated its Exchange Settlement Account (ESA) Policy after determining that a number of changes were appropriate to provide more information about the eligibility requirements and application process, including the various risk management criteria applicants would be expected to meet.
The changes seek to ensure that the ESA Policy continues to promote competition in the market for payment services by providing access to ESAs for non-ADI entities whose applications are successful, while also ensuring that operational, liquidity and other risks are appropriately managed.
Some of the changes have been motivated by developments in technology that have allowed a wider range of non-ADI entities (including ‘fintechs’) to compete directly with incumbents in the payments system. As a result, the number of entities applying for or enquiring about an ESA has increased.
The last major revision to the Policy was in 1999 when it was liberalised to allow non-ADI providers of third-party payment services to apply for an ESA to settle clearing obligations with other payment providers.
The updated policy now also requires that any Australian securities settlement facilities that are determined to be systemically important in Australia, and that face Australian dollar liquidity risk from their settlement related activities, must use an ESA. This was already a requirement for systemically important central counterparties. The purpose of this requirement is to address risks that could be transmitted to the Australian financial system from the operation of these facilities.
Australian-licensed clearing and settlement facilities may also apply for an exemption from the requirement to maintain management and resources in Australia, so as to be able to manage their ESA from an approved offshore location. Eligibility for such an exemption will be determined on a case-by-case basis.
