Payment operations of a country should have a well-established, clear, transparent and enforceable legal basis for each important aspect of activities and in all competent areas of jurisdiction.
A solid legal basis is of key importance for an effective functioning of the overall payment system. The legal basis defines or gives corresponding parties the basis for defining the rights and obligations of its participants. The majority of risk management mechanisms are based on assumptions on the manner and the time when these rights and obligations arise. If the legal basis for the activities and operations of the payment system is inadequate, uncertain or non transparent, it may lead to payment system participants or their clients to face unplanned, uncertain or unusable credit or liquidity risks, which can also give rise to or increase systemic risks.