William C Dudley: Remarks at panel discussion on OTC derivatives reform and broader financial reforms agenda Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the 2013 OTC Derivatives Conference, Paris, France, 12 September 2013. *  *  *  It is a pleasure to be here. Who wouldn’t want to be in Paris – anytime – let alone in September? My comments today will focus on how over-the-counter (OTC) derivatives reform fits in with the broader financial reform agenda and those aspects of the reform effort in OTC derivatives that could potentially fall short relative to those broader objectives. My short answer, which I will elaborate on in my remarks, is that the OTC derivatives reform effort fits in very well with the broader reform agenda, but there are significant risks that we will fall short in this arena relative to what we are likely to achieve elsewhere. As I see it, the G20 reform effort for OTC derivatives has three broad goals:   Reduce systemic risk with respect to OTC derivatives activities;    Improve the ability to aggregate and analyze over-the-counter derivatives OTCD risk exposures across markets, institutions and product classes; and    Improve competition and protect against market abuse. Systemic risk is being reduced in a number of different ways.
If a private player were to run such a system, all participating banks  18 Swish is owned by Getswish AB but administrated by Bankgirot. 19 As of April 2018. Current statistics on payments can be found on the Riksbank’s website, www.riksbank.se/sv/finansiell-stabilitet/betalningssystemet-rix/statistik-over-betalningar-i-rix/2018/. 7 [15]  would have large claims on that player, just as they have on the Riksbank at present. If such a private player were to enter bankruptcy, this money would be lost. That risk does not exist when the central bank runs the system. In addition, the central bank can supply the necessary liquidity that allows payments to function without friction. The central bank can thus function as ‘the banks’ bank’. It is therefore common for the settlement system to be placed at the central bank. It is also a service demanded by the banks themselves. Settlement in the RIX system also involves finality, which is to say that the payment is legally executed when it arrives in our system. The payment market is changing The arrival of the Internet in the late 1990s and early 2000s boosted the digitalisation of society and the payment market. New participants entered the market and many digital services linked to payments are presently offered, such as mobile solutions, electronic identification and so on. Changed consumption patterns such as increased on-line shopping are also generating demand for digital payments.