New technology, new participants, new regulations and more globalisation have made this fairly complicated subject matter even more challenging to keep up with. Norges Bank has a statutory responsibility for promoting an efficient payment system. This responsibility becomes even more demanding when the systems change rapidly. The focus of my address here today will be on Norges Bank’s responsibility as distinct from the responsibility of the market participants and, in particular, that of the banks. However, before I embark upon this I will provide an assessment of risk and efficiency in the Norwegian payment system. I would like to begin with four observations on risk and efficiency in the payment system: 2. Observations  First, payment system risk is closely linked to the organisation of payment services (legal agreements, time of payment, etc.) Central banks have been particularly concerned with risk in large value transfer systems, or systems for clearing and settlement of payments between banks. These systems are located at the top of the so-called payment pyramid.
1  BIS Review 7/2000  Chart 1: The payment pyramid  The payment pyramid  inte rba nk s y ste m  S e ttle m e n t b an k  C le arin g h o u s e  Ban k  B an k  P a y er  pa ym e nt se rv ice s sy st em (re tail)  P a y ee  This is where the large, time-critical payments occur and obviously where the system risk is greatest. Disruptions in this segment of the payment system can lead to severe consequences, partly through the banks’ exposure to each other and partly through the banks’ processing of payments to and from their customers – i.e. retail payments. At Norges Bank, we have come to focus more on risk in the retail payment system, not least because many small transactions can amount to a fairly large sum, but also because it typically takes some time before final settlement between banks occurs. Internationally, more attention has been paid to risk in retail systems. Moreover, if such systems combine pure retail payments and large payments - as is the case in Norway - it is recommended internationally that the risk-reduction measures be as strict for these systems as for systems for large-value transfers. We have also seen that part of the credit risk between banks arises in connection with (the legal basis related to) the various payment services.