It should also enable more efficient, effective and inclusive payments, including in ways that we cannot fully anticipate. It is not a one-way street, however. As we extend access, we will safeguard resilience in three ways: by holding settlement account holders to the appropriate standards; by removing legislative barriers to non-bank access; and by designing the right account arrangements for new entrants. I am pleased that both the FCA and HMRC, who together supervise these institutions, are committed to developing a strengthened supervisory regime for those who apply for an RTGS settlement account, to give assurance that non-bank PSPs can safely take their place at the heart of the payment system. And I welcome the Chancellor’s commitment tonight to make the necessary legislative changes to ensure that these new entrants can access RTGS safely and efficiently. 7 By extending RTGS access, our objective is to increase competition and innovation in the market for payment services. To ensure that PSPs are not disadvantaged relative to banks offering equivalent payment services, the Bank intends to give appropriate remuneration for balances that PSPs will be required to hold overnight to support their payments activities. 8 The second way the Bank is enabling the FinTech transformation is by being open to providing access to central bank money for new forms of wholesale securities settlement. Securities settlement is the lifeblood of modern wholesale financial markets – the associated payments account for fully half of RTGS’s daily settlement flows. However, as with retail payments, securities settlement is now ripe for innovation.
There are still expectations of an increase in international interest rates, but market participants have lowered their growth and interest rate expectations as a result of high oil prices. Growth in the Norwegian economy picked up during the second half of 2003. The low interest rate has contributed to strong growth in private consumption and housing investment. Activity has picked up in service industries and the construction sector. High petroleum investment, the global economic recovery and a weaker krone through 2003 have improved conditions for manufacturing. Profitability is improving for mainland enterprises. There are signs of renewed growth in investment in a number of industries. Imports have expanded markedly. Potential growth in the Norwegian economy is estimated to increase somewhat more than normal this year as a result of increased competition and rationalisation in many sectors. This will contribute to fairly high growth in the Norwegian economy without the emergence of constraints on the supply of labour or productive capital. The high rate of growth in output nevertheless implies that the output gap will approach zero towards the end of 2004. The output gap is a measure of the difference between the actual level of output and potential output. Developments in the output gap provide a basis for assessing cyclical developments and can thus shed light on domestic price and cost pressures in the economy. It is difficult to know how high capacity utilisation is at any given time.