Transcript Dia 1

Central Banks and the Dynamic World of
Payments and Securities Settlement Systems
Michael van Doeveren
4th Conference on Payments and Securities Settlement Systems
Ohrid, republic of Macedonia, 20 June 2011
John Shephard-Berron
1926-2010
Agenda






Definitions & Objectives
Roles of Central Banks in Payment Systems
Financial Crisis
Global Dependencies
Financial Integration
Discussion Points
Role of Central Banks
IT´S ALL ABOUT
FINANCIAL STABILITY and
CONFIDENCE
Mission of the Central Bank
De Nederlandsche Bank:
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
payment system
Payment Systems Policy
Main Goal
 to promote reliable, efficient and secure payment and
securities settlement systems
 Other Goals: central bank specific
• Crime prevention
• Effective competition
• Consumer protection
• Reachability & Accessibility
• Research and statistics (knowledge centre)
How to Achieve Policy Objectives?
 OPERATIONS
 OVERSIGHT
 CATALYST
Operational role of a Central Bank








Issuance and distribution of cash
Operator large value payment system
Settlement services retail transactions
Cash settlement securities transactions
Clearing services retail payments
Operator securities settlement system
Other securities related services
Public sector payments
Oversight
 ‘A central bank activity focused on the safety and
efficiency of payment and securities settlement
systems, in particular to reduce systemic risk’.
Catalyst
 There is a case for intervention, but not
necessarily via regulation or operations
 ‘Guide’ the market, by promoting initiatives and
cooperation
 Between stakeholders
 Between other public authorities
• Government
• Competition authorities
Importance of 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)
Payment System (1)
 Funds Transfer System: a formal arrangement
based on a private contract or legislation, with
multiple membership, common rules and
standardised arrangements, for the transmission,
clearing, netting and/or settlement of monetary
obligations arising between its members.
Source:ECB
Payment System (2)
• The set of instruments, banking procedures and
interbank funds transfer systems which facilitate
the circulation of money in a country or currency
area.
Source: ECB
Payment Chain
debit
credit
payment
instruction
payment
information
bank
bank
clearing
debit
payment
information
credit
payment
instruction
seller
buyer
good/service
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
Payments Pyramid - Eurosystem
Wholesale: 0,6% in terms of
number…..
Average daily value of transactions (EUR
billions)
3.500
PNS
3.000
Average daily number of transactions
(millions)
120
Euro1
2.500
2.000
1.500
100
OTHER
1.000
BI-COM
80
RPS
60
Equens
TARGET2
500
0
Wholesale PS
40
Retail PS
SIT
20
…..but 97,7% in terms of
value
0
Wholesale PS
Source: ECB
Retail PS
Payments Pyramid - Eurosystem
billions
10.000
Distribution of payment systems
TARGET2
1.000
Wholesale PS
EURO1
100
SIT
Retail PS
SNCE
10
EQUENS
SICOI
1
1
10
100
1.000
10.000
100.000
thousands
Large Value Payment Systems
International comparison- Value of transactions (EUR Billions)
800.000
700.000
CHAPS Euro
600.000
BOJ-NET
500.000
CHIPS
Fedwire
400.000
CLS
300.000
TARGET
200.000
EURO1
100.000
0
2004
Bron: BIS
2005
2006
2007
2008
Wholesale Payments
 DNS: Deferred Net Settlement (nettting)
• 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
 Hybride Systems
Wholesale Payments
TRENDS/ISSUES
 Liquidity management
• Real time settlement → higher demands on
liquidity management
• TARGET2: range of tools to control, monitor
and manage liquidity
 Operational resilience and business continuity
management as a result of global
interdependencies.
Trends in Retail Payments in the EU
Payment transactions in the euro area (billions)
22
20
18
16
debit and credit cards
14
credit transfers
12
direct debits
10
cheques
8
E-money purchases
6
4
2
0
2000
2001
Source: ECB
2002
2003
2004
2005
2006
2007
2008
2009
Issues in Retail Payments
 Efficiency
 Security
 More Electronification and less paper based:
Internet banking and card payments
 Innovations: products and markets
 Political influence, legislation and standards
 Business models –interchange fees
Securities Chain
trading
clearing
settlement
Agreement to
exchange securities for
funds
Calculation of obligations
Delivery of securities
and payment of funds
Securities Settlement Systems
A system which allows the transfer of
securities,either free of payment (FOP) or
against payment (delivery versus payment)
Source: ECB
LVPS
BANK A
BANK B
CSD
Securities Settlement Systems
Trends/Issues
•
•
•
•
•
Settlement risks (DVP)
Securities Legislation: MiFID etc.
Multiple platforms
Cross border links (global interdependencies)
Settlement of derivatives: role for CCPs
Financial Crisis
Key words: EXCESSIVE OPTIMISM
EXCESSIVE RISK APPETITE
ASPECTS
 Relative Stability (the great moderation, Bernanke)
 Search for Yield
 Easing Criteria for Credit (subprime, alt-a etc)
 Innovations (originate-to-distribute model, monoliners etc)
FINANCIAL CRISIS
15 september 2008
Lehman Brothers †
Trigger of severe loss of confidence,
wave of contagion
FINANCIAL CRISIS
 Crisis Management
• Provision Liquidity
• Nationalizations
• Savings Guarantee
• Capital Injections & Debt Guarantees
• Interest rates ↓
In order to
UNDERPIN CONFIDENCE
 PSSS functioned quite well
FINANCIAL CRISIS
What´s Next?






Credit crunch
Stock Markets
Banking Sector
Insurance sector
House prices
Pension funds




World recession
Protection
Greece/country risks
Euro?
Recommendations of Financial
Stability Forum





Improve Risk Management
Enlarge Transparency
Further Cooperation between Public Authorities
Reform supervision
Improve Crisis Management
Payments and Securities
Infrastructure
WEB OF GLOBAL INTERDEPENDENCIES
(LVPSs, CCPs, CSDs, Banks)
WITH TIGHT DEADLINES
(RTGS, DVP, PVP)
Key words
● Technological developments
● Globalization
● Consolidation in financial sector
Source: BIS, The Interdependencies of payment and settlement
systems 2008
CPSS REPORT ON INTERDEPENDENCIES
Figure 6: Profile of Institutions’ Activities and Access Choices, 2006
(by country, with number of financial institutions* in parentheses)
Very
Significant
International
Settlement
Activity
Significant
International
Settlement
Activity
Moderate
International
Settlement
Activity
CH (1)
FR (1)
JP (1)
US (1)
DE (1)
NL (1)
UK (1)
US (1)
UK (1)
CH (1)
NL (1)
IT (1)
FR (2)
JP (1)
BE (2)
IT (2)
JP (1)
NL (1)
SG (1)
US (3)
CA (5)
DE (2)
FR (1)
SE (3)
UK (1)
DE (1)
JP (1)
UK (1)
Primary reliance on
correspondents
and custodians
beyond home
currency; direct
participation in CLS
and one or more
ICSDs
* At the highest holding company level
Mixed Approach: Significant selfclearing in multiple currency zones,
but moderate levels of direct
participation
Domestic, plus
Domestic, plus
one or two of:
more than three
EUR, USD, or
CPSS currencies
YEN
Significant selfclearing in most
CPSS
currencies, and
beyond
Financial European integration – why?
 Euro Area: 17 National Markets
 Limitations on Competition
 Diseconomies of Scale
 Inefficiencies with reference to cross-border
flows of money, securities and collateral
Financial European integration – how?
1. Institutional arrangements
2. Financial markets
3. Infrastructures →payment and securities
settlement systems
Infrastructures
• Essential for Financial Stability
• Central Banks Play Key Role
Guidelines for payment system
development




The role of the banking sector
Effective planning and project implementation
Developing the institutional framework
Designing a safe and efficient payment
infrastructure
Source: Report of BIS-CPSS, General guidance for payment system development,
2005
Dutch National Forum on the Payment
System
 Objective: contributing to an efficient
organisation of the Dutch retail payment system
from a social point of view
 Isues regarding
•
•
•
•
Efficiency
Security
Technological developments
Reachability & Accessibility
Results of the Dutch National Forum
•
•
•
•
•
•
•
Rounding-off to nearest 5 cents
Joint information brochures
Report on availability of banking services
Guideline for user-friendly EFTPOS terminals
Support for National SEPA Migration Plan
Warning for security risks overlay services
A lot of research with regard to efficiency,
accessibility and security of payment instruments
Discussion points
• What are recent changes in your country with
respect to payments and securities settlement
systems?
• How does your central bank fill in the different
roles in PSSS?
• Do you agree with the need of bringing together
stakeholders for the development of payment
and securities settlement system? How do you
organise this?