Supervision of payment institutions and electronic money institutions
A credible and stable financial sector is one of the basic preconditions for a functioning economy. Such credibility and stability cannot be guaranteed by market mechanisms alone, so the activities of payment service providers and electronic money issuers are governed by restrictive and injunctive regulations, which chiefly take the form of legal rules governing the provision of payment services and the issuance of electronic money. The CNB oversees adherence to these rules and ensures accountability for any contravention of them. Supervision of payment institutions and electronic money institutions and of small-scale electronic money issuers and small-scale payment service providers is an integral part of maintaining the stability of the financial system in the Czech Republic and promoting its sound and smooth development. This broadly defined objective means in particular supporting the sound development, market discipline and competitiveness of the supervised institutions, preventing systemic crises and strengthening public confidence in the financial system.
It is not the aim of supervision of the provision of payment services and the issuance of electronic money to prevent failure of individual institutions at all costs, to substitute for courts and arbitrators in deciding on private law relationships between service providers and their clients, or to substitute for law enforcement authorities. The bodies of a payment service provider or electronic money institution are responsible for ensuring that its internal control mechanisms and risk management system are functioning. The supervisory authority’s job is to carry out subsequent checks focused on compliance with the regulations. The supervisor cannot itself prevent loss-making transactions. If the supervisory authority uncovers any shortcomings, however, it is obliged to apply its remedial instruments, which can include revoking authorisation to operate. These public law measures are intended to protect the financial market as a whole and to reduce the possibility of similar unlawful conduct happening in the future.
Under to the Act on the Czech National Bank, supervision includes decisions on licence, permit and registration applications and prior approvals pursuant to special legal rules; inspection of adherence to the conditions stipulated in licences and authorisations; inspection of adherence to laws, insofar as the CNB has the power to conduct such inspections under the law or special legal rules; inspection of adherence to the decrees and provisions issued by the CNB; collection of information needed to perform supervision and its enforcement, and verification of whether it is true, complete and up-to-date; the imposition of remedial measures and penalties; and proceedings regarding administrative offences.
The activities of payment service providers and electronic money issuers are governed by Act No. 370/2017 Coll. on payment system, as amended. Under this Act, the CNB is authorised to issue provisions and decrees specifying conditions for entry to the sector and prudential rules for the activities of payment service providers and electronic money issuers.