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BIS home Monetary & financial stability Committee on Payment and Settlement Systems Central bank oversight of payment and settlement systemsCPSS Publications No. 68 May 2005
Foreword
Central banks have always had a close interest in the safety and efficiency of
payment and settlement systems. One of the principal functions of central banks
is to be the guardian of public confidence in money, and this confidence
depends crucially on the ability of economic agents to transmit money and
financial instruments smoothly and securely through payment and settlement
systems. The systems must therefore be strong and reliable, available even when
the markets around them are in crisis and never themselves the source of such
crisis.
Central banks have traditionally influenced payment and settlement systems
primarily by being banks which provide a variety of payment and settlement
services to other banks. As such, central banks provide a safe settlement asset
and in most cases they operate systems which allow for the transfer of that
settlement asset. It is only relatively recently that oversight has become a
function that is more formal and systematic - namely a function whereby the
objectives of safety and efficiency are promoted by monitoring existing and
planned systems, assessing them against these objectives and, where necessary,
inducing change. However, although recent, this development in the nature of
oversight has been rapid and the function has now come to be generally
recognised as a core responsibility of central banks.
Given this importance, and the experience that has been gained over the years,
the Committee on Payment and Settlement Systems felt it would be useful to set
out publicly what has been learned about effective oversight. Most of this
report is descriptive and analytical, explaining why and how central banks
oversee payment and settlement systems. It looks at the need for oversight, the
source of central banks' responsibilities for oversight, the scope of oversight
and the activities that oversight involves. In addition it looks at cooperative
oversight, where more than one central bank or other authority has
responsibilities for a system. However, as well as this description and
analysis, the report also includes 10 principles for effective oversight, each
with explanatory text. Five of the principles are generally applicable to
oversight arrangements while the other five are specifically for cooperative
oversight arrangements. All the principles are consistent with, and indeed
largely drawn from, the previous work on payment and settlement systems
published by the Committee and earlier groups reporting to the G10 Governors.
The Committee set up a Working Group on Oversight of Payment and Settlement
Systems to help it produce this report. The CPSS is very grateful to the
members of the working group, its chairman, Martin Andersson of Sveriges
Riksbank, and the CPSS secretariat at the BIS for their excellent work in
preparing this report.
Tommaso Padoa-Schioppa, Chairman
Committee on Payment and Settlement Systems
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