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De Nederlandsche Bank
Actual Developments of Payments
and Securities Settlement Systems
Michael van Doeveren
2nd Conference of the Macedonian
Financial Sector on Payments and
Securities Settlement Systems
Ohrid
29 June 2009
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Agenda

Definitions and Concepts

Role of central banks

Actual developments
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International developments
FINANCIAL CRISIS
CRISIS MANAGEMENT
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Role of central banks
IT´S ALL ABOUT
FINANCIAL STABILITY
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Mission of the central bank
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Safeguarding the stability of the financial
system and the institutions that are part of it,
by
 contributing to the monetary policy of the
Eurosystem
 supervising the financial soundness and
integrity of financial institutions
 promoting the smooth functioning of the
payments system
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Payment systems policy
OBJECTIVES
MAIN GOAL
 to promote safe and efficient payment and
settlement systems
Other goals: central bank specific
 e.g. crime prevention, effective competition,
consumer protection, accessibility
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Importance payment systems
Payment systems …
… facilitate the exchange of goods and
services
… are necessary to conduct monetary policy
… can be transmission channels of
‘disturbances’ (financial crises)
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Payment chain
CENTRAL BANK
bank
bank
RETAIL PAYMENTS
buyer
seller
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Payment chain
CENTRAL BANK
WHOLESALE PAYMENTS
bank
buyer
bank
bank
bank
seller
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Retail versus wholesale payments
Low value
↔
Large value
High volume
↔
Low volume
Consumers and
businesses
↔
Financial institutions
Time less important
↔
Time critical
Low systemic risk
↔
High systemic risk
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Payment Pyramid - Eurosystem
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Payment Pyramid - Eurosystem
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Trends in payments in the EU
18
16
14
12
debit and credit cards
credit transfers
10
direct debits
8
cheques
E-money cards
6
4
2
0
2000
2001
2002
2003
2004
2005
2006
2007
Source ECB
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EFFICIENCY: Room for improvement?
Value of banknotes and coins as a % of GDP
25%
20%
15%
10%
5%
0%
Euro area
Euro area
(excl. 200
& 500 euro)
Bulgaria
Macedonia
2002
Source ECB,NBU,IMF,HNB
2003
Romenia
2004
Ukraine
2005
Note: Data Ukraine and Macedonia excl imprinters
2006
Slovenia
Albania
Croatia
2007
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EFFICIENCY: Room for improvement?
Number of card payments as a % of national payments
40
35
30
25
20
15
10
5
0
Euro Area
2002
2003
Bulgaria
2004
2005
Hungary
2006
Romania
Slovenia
The
Netherlands
2007
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EFFICIENCY: Room for improvement?
Number of POS terminals per million inhabitants
25.000
20.000
15.000
10.000
5.000
0
Euro area
Bulgaria
Hungary
2002
Source ECB,NBU
Macedonia
2003
2004
Note: Data Ukraine and Macedonia excl imprinters
Romenia
2005
2006
Ukraine
Slovenia
The
Netherlands
2007
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Paper ratio of giro transfers
The Netherlands
Macedonia
100%
100%
95%
90%
90%
80%
85%
70%
80%
60%
75%
50%
70%
40%
65%
30%
60%
20%
55%
10%
50%
2005
2006
Non-paperbased
2007
Paperbased
2008
0%
2005
2006
Non-paperbased
2007
2008
paperbased
Including: Credit transfers,Direct Debits, cheques
Source: DNB, NBRM
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RETAIL PAYMENTS
TRENDS/ISSUES
● growth of card payments
● costs of payments
● interchange fees/business models
● innovations
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GROWTH OF CARDS PAYMENTS
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COSTS OF PAYMENTS
World Retail Banking Report 2005
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Innovations
EXAMPLES
• Internet banking
• E-invoicing
• Biometric identification
• Contactless cards
• M-payments
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WHOLESALE PAYMENTS
DNS: Deferred Net Settlement
 Multilateral, usually at the end of the day
RTGS: Real Time Gross Settlement
 continuous (real-time) settlement of funds
transfers individually on an order-by-order
basis
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WHOLESALE PAYMENTS
TRENDS/ISSUES
● Liquidity management
 Real time settlement → higher demands on
liquidity management
 T2: range of tools to control, monitor and
manage liquidity
● Operational resilience, e.g. as a result of
global interdependencies
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TARGET2 in Europe
Countries on TARGET2
---- of which €
Other EU-countries
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Securities Settlement Systems
A typical settlement transaction has
 Cash Leg
 Securities Leg
and involves
 CSD: Central Securities Depository
 LVPS: Large Value Payment System
 CCP: Central Counterparty
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Securities Settlement Systems
LVPS
BANK A
BANK B
CSD
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Interfaced / Integrated Model
Interfaced
 CSD has the securities account, CB the cash
account. Communication through an interface
Integrated
 CB or CSD operates both the cash and
securities account, e.g.
 CB outsources cash settlement
 CB insources securities settlement
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Securities Settlement Systems
CSDs
 settlement of securities transactions
 depository of securities
 corporate actions
CCPs
 buyer to the seller
 seller to the buyer
 often uses multilateral netting (clearing)
 contributes to efficiency, mitigates risk
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Securities Settlement Systems
TRENDS/ISSUES



Settlement risks (DVP)
Multiple platforms
Cross border links (global
interdependencies)
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Large Value Payment Systems
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How to Achieve Policy
Objectives?

OPERATIONS

OVERSIGHT

CATALYST
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Operational role central bank
Issuance and distribution of cash
 Operator large value transfer system
 Settlement services retail transactions
 Cash settlement securities transactions
 Clearing services retail payments
 Operator securities settlement system
 Other securities related services
 Public sector payments

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Oversight

‘a central bank activity focused on the safety
and efficiency of payment and securities
settlement systems, in particular to reduce
systemic risk’.
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Oversight
Scope central bank oversight varies:

just systemically important systems,
including securities settlement systems

including retail systems

Including payment instruments
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Catalyst
Case for intervention, but not necessarily
regulation or operations
 ‘Third way’ - ‘guide’ the market, by promoting
initiatives and co-operation
 between stakeholders
 between other public authorities, e.g.
-
Government
Competition authorities
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Emphasis on oversight (e.g. DNB)
Large
value
Retail
Securities
settlement
Operations
Oversight
Catalyst
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Emphasis on operations (e.g. Fed)
Large
value
Retail
Securities
settlement
Operations
Oversight
Catalyst
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International developments
KEY WORDS


Globalization
Consolidation Financial Sector
NEED FOR FURTHER COOPERATION
 National
 Supervisors
 Competition Authorities
 Government
● International

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International developments
Business
Continuity
Management
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International cooperation
Bank of International Settlements
Main Committees
 BCBS (Basel Committee of Banking Supervisors)
 CPSS (Committee on Payment and Securities Settlement)
 CGFS (Committee on Global Financial Stability)
 Committee on Central Bank Statistics
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Financial European integration – why?

EURO AREA: 16 National Markets

Limitations on Competition

Diseconomies of Scale

Inefficiencies wrt cross-border flows of money,
securities and collateral
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Financial European integration – how?
1.
2.
3.
INSTITUTIONAL ARRANGEMENTS
FINANCIAL MARKETS
INFRASTRUCTURES →payment and
securities settlement systems
INFRASTRUCTURES
 Essential for Financial Stability
 Central Banks Play Key Role
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Financial European integration – how?
EURO AREA PROJECTS
TARGET 2
 TARGET 2 Securities
 CCBM2
 SEPA
 SECA

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