Oversight and Innovation in Payments and Settlements
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.
Learning outcomes
- Understand how financial market infrastructures are responding to innovation
- Assess the opportunities for improving cross-border payments
- Gain insight into how oversight frameworks are changing
- Apply network analytics to design and oversight