Structures must be in place to prevent weaknesses in the financial system, such as payment or delivery difficulties on the part of a system participant, spreading in an uncontrolled fashion to other participants. In this context, the focus is, for example, on requirements relating to the payment instruments used, the irrevocability of transactions that have already been settled (finality), and on instruments and procedures to limit credit and liquidity risks. 2  BIS Review 58/2003  Collaboration with other authorities The National Bank is not the only institution which actively endeavours to secure the stability of the financial system. There is also contact with other authorities. One of these points of contact arises from the fact that, for example, the operator of SECOM (SIS Sega Intersettle AG) holds a bank licence and is therefore subject to supervision by the FBC. The FBC will still be the regulatory body responsible for the institution itself, while the National Bank will handle the oversight of the system operated by this institution. A parallel situation exists in the case of x-clear, which is operated by SIS x-clear AG - also regulated, as a bank, by the FBC. The FBC and the National Bank coordinate their activities and avoid overlaps. A further point of contact with other authorities exists in the case of financial market infrastructures that are of systemic importance to Switzerland but are operated abroad and thus cannot be overseen directly by the National Bank.
Our use of early warning indicators is precisely because we have learned the hard way with banks that excessive reliance on modelled capital requirements lends itself to cutting capital levels too low. In banking supervision we are playing catch-up by working to raise capital levels from ones that were too low. We can avoid that outcome for insurance by acting now to introduce sensible backstops. Turning finally to the broader global environment, the financial crisis has led to a great deal of debate around whether insurers contribute to systemic risk in the financial system. The IAIS has been considering whether there are insurers which can be classed as Globally Systemically Important. In doing so, it has developed a methodology to identify insurers whose distress or disorderly failure, because of their size, interconnectedness, and the nature of their activities would cause significant disruption to the global financial system and economic activity. This work is at an advanced stage and we should hear shortly from the Financial Stability Board on a list of global systemically important insurers. The implications for being labelled as a GSII will then need to be considered. The PRA recognises that insurers are not systemic in the same way as banks. However, we strongly believe that failure of some insurers could have the potential to pose risks to the stability of the financial system or to directly disrupt economic activity through the availability of risk transfer.