To preserve this advantage, Norway needs to be a leader. Technological developments pave the way for new possibilities – new means of payment are introduced and existing means of payment become faster and cheaper. While most changes result in a more efficient system, they also pose new challenges. New technology and outsourcing require stricter standards for both the risk management framework and contingency preparedness. Responsibility rests with system owners. As supervisory and oversight authority, Norges Bank has a duty to point out any deficiencies and weaknesses. There are also challenges associated with the pricing of payment services. When given a choice of payment solution, customers are not charged prices that reflect actual costs. Does this make the system more expensive than necessary? Banks operate most of their payment solutions at a loss. Does this have to be? Are banks’ incentives to invest in secure and forward-looking solutions being weakened? Risk and costs are drivers of change The main structure of the payment system has remained fixed for a number of years, but there have been changes, both to the part of the system customers encounter and to interbank settlement. Behind many of the changes is a desire to reduce risk or costs, often both. 2  1  See the Payment Systems Act. 2  The discussion of trade-offs between costs and risk is inspired by Kahn et al.
In today’s markets, there is a large premium on ex ante clarity and certainty, as opposed to ex post negotiation amongst bankers who know and trust each other. The work required is detailed and largely out of the limelight. But getting clarity around things like “close out netting” may make all the difference when the music stops. 11 The official community therefore needs to maintain its encouragement and support for private sector initiatives to standardise and improve documentation. To take just a few examples from what could be a long list, this includes the work of New York’s Global Documentation Steering Group; of various market trade associations; and of London’s Securities Lending and Repo Committee, which helps co-ordinate the work of different parts of the collateral-financing markets. 12  Summary I have travelled from macro to micro. To maintain the two elements of monetary stability – price stability, and financial stability – we need credible and effective institutions. 11  Close-out netting is a process by which, following a default, open transactions between two parties are terminated, each transaction is valued and, together with any outstanding payments, these are reduced to a single net amount owed by one of the parties to the other. Obtaining legal certainty over recognition of netting across different products and, in particular, with different legal entities with a common group is very important.