Materialization of systemic risk will disrupt not only settlements between banks but also those between firms and households, having a profound impact on the economy and on the society as a whole. Such systemic risk inherent in the network of settlements is what differentiates the banking sector from other industrial sectors.
The role of the central bank is to constantly monitor the institutional framework and the operation of payment and settlement systems, working in coordination with the parties concerned to thereby prevent the materialization of systemic risk. The central bank must also ensure that the system can be provided the funds to break the chain reaction of defaults should some emergency occur.