Recently some funds have invested in “alternative” assets such as hedge funds, private equity and infrastructure, and structured credit. Shares in closed-end funds are traded like other equities. The funds may issue their own debt to obtain leverage. They may also issue different classes of shares with different entitlements to income or capital receipts from the underlying investments. CP (Commercial paper) conduit. A SPV that issues CP backed by financial assets originated by one or more sellers. They are generally supported by liquidity facilities provided by their sponsor or a third-party bank. DPC: Derivative product company. A bankruptcy-remote structure that houses credit risk from long-dated derivative transactions. They are typically wholly-owned subsidiaries of financial services companies. In general, DPCs sit between their sponsor and an external counterparty in derivative transactions and protect the counterparty from the potential default of the derivative seller (the sponsor). Monoline insurance companies. Monoline insurance companies provide protection against a specific type of risk (typically credit risk). Originally developed in the 1970s to provide US municipal bond holders with credit guarantees (or  BIS Review 44/2007  7  “wraps”), over the past few decades they have diversified into the ABS and CDO markets (particularly the highly-rated senior tranches). SIV: Structured Investment Vehicle. A SPV that funds a diversified portfolio of highly rated assets by issuing short-term commercial paper, medium-term notes etc. In general, there is a maturity mismatch between their assets and liabilities. They aim to generate a positive spread between their return on assets and funding costs.
BIS Review 66/2002  7  Despite these positive results, Norges Bank has decided to modernise the current settlement system because the existing system is complicated and tightly interwoven with other systems. This makes the settlement system vulnerable. Operation and maintenance of the current system also require relatively extensive resources. Following discussions with the banking industry about the division of responsibility and organisation of the Norwegian clearing and settlement system, it has been decided that the current division of responsibility will remain virtually unchanged. Banks will be responsible for gathering transactions and for netting and Norges Bank will be responsible for settlement. Norges Bank has decided to outsource the operational activities of settlement. We are currently preparing an invitation to tender for prospective partners. We will devote considerable attention to these issues in the future. We assume that we will have a definite plan for the site of our settlement operations by summer 2003, with implementation next autumn. International recommendations and work The Committee on Payment and Settlement Systems (CPSS) in the Bank for International Settlements (BIS) has established a separate Working Group on Retail Payment Systems. In September this year, the working group submitted a report on “Policy issues for central banks in retail payments”. 11.