What applies to single financial institutions obviously also applies to institutions of financial market infrastructure, to central banks and to institutions of supervision and oversight in general. The same insights apply to everyone: Be aware of the new dimensions of systemic risk within globalized financial markets and refrain from early satisfaction with what you appear to have achieved. At this point, I would like to stress that the overall resilience of the financial sector also depends on the financial strength of each institution. In retrospect it might be said it was a benign coincidence that the September 11, 2001 attacks happened in a period of comparatively favorable economic conditions in the financial industry. Under less favorable circumstances the capacity to absorb shocks could have been considerably smaller. This is another reason why the rapid implementation of the new Basel Accord on capital adequacy is so very important for the financial system as a whole. In addition to this it is obvious that further and new tasks arise for regulatory agencies and central banks at the national as well as the international level. Addressing the issue of disaster recovery has to become part of the routine supervisory process. Supervisory guidelines and examination procedures are being adjusted in this light and they are helpful tools in increasing resilience. Also, when overseeing payment systems resilience and business continuity will have to be scrutinized anew.
This has permitted the creation of today’s globalized financial industry and has made possible an impressive growth in value. The role of central bank oversight Now, let me turn to the role of central bank oversight: Every transaction - be it a commodity or a service - eventually leads to a transfer of money. From trade to settlement at least one system of the financial market infrastructure is usually involved. Given this, it is not surprising that the regulators are keeping a keen eye on market developments. Central banks, with their core mandate of monetary policy, have an especially close relationship with the payment systems. To the overseers of payment systems the main objective is safety. The definition and standards of safety have evolved with the years. For a long time the main interest of central banks in payment systems came from computer experts. Payment systems used to be viewed merely as ‘computers’ that cleared and settled payment obligations. In the late 1980s the focus started to shift towards the financial risks, i.e. credit and liquidity risk inherent in payment systems. Slowly it became common knowledge that payment systems could be a source of systemic risk by providing a channel through which the failure of one participant to meet its payment obligations could be passed on to other participants. In their own best interest and under the influence of the overseers operators started to protect their systems against financial risks - in most cases by building Real-Time Gross Settlement systems (RTGS).