It is a payment and settlement system capable of preventing the outbreak of a financial crisis even in the face of an extremely stressful shock to itself. To realize such a robust system, it is important to identify what determines the magnitude of systemic risk, that is, the factor that influences the probability of a certain shock leading to a financial crisis.
In my view, the following three measures are essential to mitigate systemic risk in payment and settlement systems: (1) reducing the size of outstanding settlement positions of individual market participants; (2) taking appropriate measures depending on the state of interconnectedness embedded in payment and settlement systems; and (3) enhancing alternative arrangements for critical settlement functions.