Autumn
2006 Training Course/Seminar Series
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Effective Oversight Of Payment And Settlement Systems
4-day intensive residential programme, 5 - 8 September
2006
Venue: King’s College, Cambridge University
Course Director: Peter Allsopp, Allsopp Consultancy Services, former
Head of Payment Systems, Bank of England
Series Adviser: Charles Goodhart, CBE, Professor Emeritus, London School
of Economics, Financial Markets Group
Details of how to register
are here
EFFECTIVE OVERSIGHT OF PAYMENT AND SETTLEMENT SYSTEMS
Every central banker recognises that systems for making payments and settling securities are vital to financial markets, but these systems are now under growing pressure from changing market demands, international standards and technological progress.. They are the arteries that connect monetary policy, markets and financial stability with the broader economy, but the arteries need constant attention and care.
For central banks, the challenge at a time of rapid economic change is to formulate a framework for ensuring safety and reliability as well as, increasingly, issues of competition and accessibility. Changing international standards mean that all central banks also face many practical problems in terms of the implementation and application of standards and new systems.
These practical issues are of two kinds. On the one hand, there are the grand policy questions: How to balance the need for innovation with adequate safeguards against systemic risk? How to ensure adequate standards at acceptable cost?
Then there are the nitty-gritty problems. These are the kind of problems that always crop up when you try to implement new standards or maintain existing systems.
This year three concerns in particular have become top priorities:
How to define the objectives and develop the function of oversight? What is the best way to measure performance?
What is the role of central banks in overseeing retail payments and remittances? What practical guidelines are available?
With markets developing ever closer links, how can overseers ensure that risks building up in one area, say securities markets, do not have knock-on effects in the payment system? Managing risks here is key.
This course is aimed to equip payment systems experts in central banks to meet all three of these challenges as well as many others.
The four-day programme of roundtable seminars and workshops offers many practical examples of payment system development and reform. The panel of expert speakers combines practical central banking experience and expertise in the technical aspects of payment systems, as well as views from private sector users. The format encourages delegates to quiz the presenters, raise issues and discuss solutions.
Participants will have frequent opportunities to learn from expert speakers and from each other, through discussions of their own national experiences and case studies.
The independent standpoint of the conference sponsor, Central Banking Publications Ltd, naturally encourages free discussion of sensitive issues and potentially allows a broader coverage of issues than courses and conferences organised by official institutions, or by commercial conference companies.
We look forward to welcoming you to Cambridge on September 5th.
Yours sincerely,
William Clarke,
CBE, PhD Chairman
Why do we
need to oversee payment systems?
Professor
Charles Goodhart
London School of Economics (invited)
The oversight of payment and settlement
systems is normally assumed to be jusified for a variety of reasons,
both economic, such as avoidance of systemic risk, and social, such
as the prevention of money-laundering. Yet central banks face an expanding
series of complex challenges related to this function. They must trade
off diverse public policy objectives, such as balancing efficiency against
risk reduction, while retaining incentives to spur innovation and competition
among providers.
This opening session will set the scene for those that follow by considering
why and how regulators should take a lead role in oversight, the objectives
that should be set and the policy tools available to achieve these.
Delegates will be invited to discuss their national payment system and
the particular challenges faced by their own institution.
The objectives of oversight
Breakout sessions Moderated by
Peter Allsopp
Chairman
In this session, participants will
split into smaller working groups to consider the diverse objectives
of central bank oversight and how individual countries can prioritate
these objectives.
Denis Beau
Deputy Director of Payment Systems, Banque de France
Every central bank needs to ensure the secure and efficient functioning of its country’s key payment systems, while encouraging innovation and avoiding excessively costly or burdensome oversight. To achieve this a central bank’s approach to oversight needs to be defined. Which systems need oversight? Where should the function be located within the central bank? The speaker discusses how the Banque de France formulates its oversight role, how it structures and locates the function, and what principles guide the central bank's approach.
Cross-border challenges
Dave Mitchell
Head of National Payment Systems, South African Reserve Bank
Smooth and safe cross-border payments are essential for globalised and expanding trade. Yet increasingly closer cross-border links between payment systems add a layer of complexity to oversight. Beyond a domestic focus, overseers need to be aware of how the actions of both foreign-incorporated market players and other regulators and overseers can impact on their payment system. Legal issues, such as rights under bankruptcy rules, are of critical importance. Building relations with other overseers as well as foreign-headquartered players is crucial.
Panel discussion: a detailed methodology of oversight
Peter Allsopp
Chairman
This panel discussion focuses on implementation of payment system oversight and new developments in methodology. Initial discussion will concentrate on the composition of the oversight function and the development of the process of oversight, before considering the perspective of the overseen.
For commercial operations that run payment systems, there is clearly scope for tensions and potential conflicts between the commercial and the regulatory objectives and priorities for the system.
How do stakeholders resolve these tensions, while continuing to meet the changing needs of their currency and market place? What are the benefits to the system, and the costs, of the oversight regime? Is a formal legal basis required?
Effective organisation of oversight function
Tomás Hládek
Head of Cash and Payment Systems, Czech National Bank
Where should the oversight function be located in the central bank? How may staff does it need and where should they be drawn from? Who should the function report to? Does it need new legal powers? For a newly formalised function such as payment system oversight, the answers to these questions remain far from clear. In this session, the speaker from the Czech National Bank discusses some of the challenges of building capacity in the oversight area of a central bank and how these can be met.
Developing the oversight function in central banks
Breakout sessions Peter Allsopp
In this session, participants will split into smaller working groups to consider the scope of central bank oversight and how a central bank can best deliver on its oversight mandate.
Strengthening
linkages in payment systems: securities
Jeffrey Marquardt
Federal Reserve Board (invited)
When the other side of a large-value
payment is a securities transaction, whether it is for outright purchase,
repo or posting collateral, its efficient settlement is critical to ensuring
the smooth functioning of the payment system and to providing and maintaining
liquid money markets and securities markets.
With markets developing closer links to facilitate STP, so the risk of
a failure in one system contaminating another increases. What steps can
the regulators take to mitigate these risks? This session will examine
why the links between payment systems and securities settlement systems
are vulnerable, and how they can be strengthened, including the introduction
of cross-border collateral arrangements.
Workshop: developments in overseeing
securities settlement systems
Breakout sessions
This session will focus on the role
of central banks in the field of clearing and settlement and participants
will consider how the robustness of these systems can be improved and
how linkages to large-value payment systems can be strengthened.
Overseeing retail payments and remittances
Michael
Lewis
Principal Consultant, Electronic
Payments & Commerce Ltd and former Deputy Head of Payment Systems,
Bank of England
While the risks in retail payments may not be “systemic”,
the failure of aretail payments system or a provider could have considerable
knock-on effects in national economies. Beyond assessing these risks,
central banks and regulators increasingly are turning their attention
to questions of efficiency, access rules and consumer protection in retail
payment systems. The acknowledgement of the importance of remittance payments
to many economies has raised awareness of how they are handled in a largely
unregulated sector. What oversight regime is appropriate to these forms
of payments? This session draws on experience from both private and public
sectors to consider new directions in the oversight of retail payments
and remittances.
Has regulation failed e-money?
Chris
Reed
Professor of Electronic Commerce
Law, Queen Mary, University of London
The use of e-money and e-commerce fits uneasily into current
legal structures. How can national authorities maintain a legal structure
that facilitates transactions in these media? This session will consider
how legal regimes can help to ensure safe and efficient payments with
electronic media and over the internet. In addition, the speaker will
examine the variety of current legal approaches to the regulation of e-money
in general and how current shortcomings could be redressed.
Business
continuity: preventing financial sector disruption
Richard
Maddison
Deputy Head of Business Continuity Management, Financial Services
Authority
Central banks and regulatory
agencies have become increasingly aware of the importance of comprehensive
and robust continuity planning for financial sector emergencies. Securing
national payment systems is integral to this process. The speaker, from
the UK's financial regulator, is responsible for the UK’s annual
business continuity exercise and will outline some of the scenarios and
issues involved. Discussion will focus on preparing and safeguarding financial
centres in the event of major operational disruptions and how this is
coordinated between the central bank, the regulator and government.
Measuring performance, effectiveness
and efficiency of an oversight regime
Speaker to be confirmed
Payment system oversight is a complex
and time-consuming task. While the importance of the task is not in doubt,
demonstration of a quantifiable output can prove difficult. How can central
banks assess the effectiveness and efficiency of oversight? In this session,
the speaker will consider ways in which central banks can measure and
benchmark the performance of their oversight function.
Course Conclusion: What if?
Peter
Allsopp
Chairman
The day and the course will conclude with a session led
by the chairman drawing in the main points of the course.
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