Eva Srejber: Vulnerabilities in the modern payment system Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at the Swedish Risk Management Conference, Eskilstuna, 18 October 2006. *  *  *  Introduction An extremely large amount of payments are made in any modern economy. In Sweden, the turnover in our payment system amounts to around SEK 1,290 billion a day (broken down into securities trading SEK 500 billion, card and credit transfers SEK 30 billion, foreign exchange trading SEK 390 billion, interbank payments SEK 350 billion and cash payments SEK 10 billion). Thus, in around two days the turnover corresponds to the value of the entire Swedish GDP in one year. It is therefore no surprise that we consider it important to examine possible vulnerabilities in the system and how we can reduce them. One of the more obvious examples of the vulnerability of the system is the many cash transport robberies in recent years, where large amounts of cash have been stolen. However, cash is only one of many ways that payments can be made and cash transports comprise a small part of the infrastructure required to ensure the payment flows in Sweden run smoothly. While a tiny fraction of the payments is made by cash, the remainder is made electronically. However, as we know, computers also have their weaknesses. This became apparent in 2000, when both the Riksbank’s system for large-value payments, RIX, and Nordbanken’s internal computer system suffered shortterm problems at different points in time.
However, it was possible to limit the damage since the system functioned from time to time and the contingency communications system was working. The problems were partly due to faulty software in the system. The problems began between Christmas and New Year 2000 and were not entirely resolved until 3 days into the new year. Afterwards, we can note that the consequences of these two problems were slight and that the existing contingency routines were sufficient to limit them. However, both examples show how important it is to have preparations that enable operations to continue, despite various types of disruption. The cost of creating an entirely resilient system must at the same time be balanced against the cost of having a slightly less resilient system and instead having good contingency routines that can be implemented when problems arise. I will return to the work on creating resilience in the system. Firstly, I shall describe how the financial infrastructure functions in practice and the importance of crisis recovery planning. The functions of the payment system To provide an idea of the extent and complexity of the payment system, I will give you a concrete example. The Swedish Social Insurance Administration pays out billions of kronor every month in  BIS Review 98/2006  1  pensions. In theory, it would seem like a fairly simple process for them to send money to Ingrid, aged 93.