Deficient payment and securities settlement systems might potentially trigger a crisis in the system. An operational or technical system failure can delay transaction settlement so severely - or even prevent it for such a long period - that widespread credit or liquidity problems among financial institutions result. In particularly serious cases, the financial institutions concerned, and perhaps even the financial markets, are no longer able to perform their role in the economy or can do so to only a limited extent. Yet on the other hand, payment and securities settlement systems also play a major part in preventing the transfer of payment or delivery problems from one participant to the others. Such difficulties might also trigger a chain reaction which could jeopardise the entire system. This makes the architecture of payment and securities settlement systems all the more important, because it determines their capacity to limit the transfer of weaknesses. Secure and efficient financial market infrastructures are especially important to the Swiss economy, which has a large financial sector and generates significant payment flows. Their significance is illustrated by the relevant figures: every day, sums amounting to around 180 billion Swiss francs pass between financial institutions via Swiss Interbank Clearing System (SIC), Switzerland’s most important payment system. With a system of this scale it is easy to imagine that problems with the clearing or settlement of transactions might jeopardise the stability of the financial system as a whole.
BIS Review 58/2003  1  The oversight of payment and securities settlement systems in practice In future, the National Bank will be taking a risk-oriented approach, i.e. we will deploy our resources in those specific areas in which the risks are particularly high. The National Bank Law stipulates a three-tier oversight process. The first tier is an obligation on the part of operators of payment and securities settlement systems to provide statistical information. The National Bank will use the data it collects to gain an overview of the breadth and importance of the systems and instruments for the clearing and settlement of payments and securities trades that are available in Switzerland. The second tier is a more wide-ranging disclosure obligation that is imposed upon the operators of securities settlement systems and those payment systems which process payments in excess of 25 billion Swiss francs a year. With payment systems of this size and larger, the National Bank will look in greater detail into the extent to which they might jeopardise the stability of the financial system. Finally, the National Bank Law provides for powers on the part of the National Bank to impose minimum requirements on systemically important financial market infrastructures as a third tier of oversight. Detailed implementation provisions for oversight will be laid down in an ordinance to be issued by the National Bank. In early November 2003, the National Bank submitted a consultation draft of this ordinance to interested parties. The draft itself can be found on our website.