Under the National Bank ActNational Bank Act, the Swiss National Bank (SNB) has the mandate to oversee systems for the clearing and settlement of payments (payment systems) and transactions with financial instruments, notably securities (securities settlement systems). The SNB focuses particularly on the systemically important payment and securities settlement systems.
Relevance of payment and securities settlement systems for the financial stability
Under the National Bank ActNational Bank Act, the Swiss National Bank (SNB) has the mandate to oversee systems for the clearing and settlement of payments (payment systems) and transactions with financial instruments, notably securities (securities settlement systems). The SNB focuses particularly on the systemically important payment and securities settlement systems. These systems have the potential to cause or transmit a systemic crisis, thus possibly jeopardising the stability of the financial system. Operational or technical problems of systemically important systems can trigger severe credit or liquidity problems for financial intermediaries. These systems also have the potential to transmit payment or delivery problems of individual participants to other participants and may thus cause serious credit or liquidity problems for financial intermediaries.
Rationale for oversight
If the implementation of a systemically important payment or securities settlement system is left solely to market forces, negative effects for third parties (e.g. due to security aspects not having been properly considered) cannot be ruled out. Therefore, the SNB works through its oversight activities, together with the system operators, towards the optimal financial market infrastructure for the economy as a whole.
Systemically important payment and securities settlement systems
When determining the systemically important systems, the SNB takes into account such factors as the type, volume and number of transactions cleared or settled via the system, the type and number of links between this system and other payment or securities settlement systems, and existing alternatives. The operators of the systemically important systems SIC (Swiss Interbank Clearing), SECOM and x-clear must comply with the minimum requirements stipulated in the National Bank Ordinance. CLS Bank International, the operator of CLS – another systemically important system – was exempted from compliance with the minimum requirements as it is already adequately overseen by the Federal Reserve.
Minimum requirements guided by international standards
The minimum requirements are based primarily on two international standards, the Core Principles for Systemically Important Payment Systems (www.bis.org/publ/cpss43.htm) and the Recommendations for Securities Settlement Systems (www.bis.org/publ/cpss46.htm), which were published by the Committee on Payment and Settlement Systems (CPSS) and by the CPSS in cooperation with the Technical Committee of the International Organisation of Securities Commissions (IOSCO) respectively. The security requirements for minimising technical and operational risks are based on international IT standards, while the requirements regarding organisation and transparency are guided by standard corporate governance principles.
The minimum requirements primarily aim at minimising risks. They are formulated in a target-oriented manner, which means that while they stipulate that the system operators must meet a certain standard, they do not prescribe how to achieve this standard. The minimum requirements relate to the following aspects: organisation, disclosure of information, contractual foundations, management and limitation of credit and liquidity risks, means of payment, security requirements to minimise technical and operational risks, and system access. The minimum requirements are stipulated in arts. 22–34 of the National Bank OrdinanceNational Bank Ordinance and are explained in the Notes to the National Bank OrdinanceNotes to the National Bank Ordinance.
Cooperation with other authorities
For the implementation of oversight, the SNB cooperates with the Swiss Federal Banking Commission (www.sfbc.ch) in the case of operators with a banking license, and with the corresponding foreign authorities in the case of system operators domiciled abroad.
Assessment of payment and securities settlement systems
The assessment of the stability of systemically important payment and securities settlement systems as well as analyses of significant developments are published in the annual Financial Stability ReportFinancial Stability Report.
. "Swiss National Bank." . . Swiss National Bank. 1.31.08 <http://www.snb.ch/en>.