Payment systems
Payment systems are comprised of two kinds of infrastructures :
- retail payment systems that exclusively settle payments flows on behalf of the private individual and the corporate customers of the banks ;
- large value payment systems that settle the flows related to monetary policy, interbank settlements, and some large-value emergency payments on behalf of private customers.
These infrastructures have replaced the correspondent banking model that still exists for international payments. The automatic mass settlement of flows has brought about a high level of efficiency and considerable economies of scale.
The flawless functioning of payment systems is critical to the financial and economic life of the country and to financial stability in general.
Securities settlement systems
Securities settlement systems are closely linked to payment systems, and as such, are likely to transfer risks onto the latter, in particular through the settlement of the cash leg of transactions in payment systems. These settlements are often made on central bank accounts, which is the case in France for the ESES France settlement system (operated by Euroclear France).
In addition, Eurosystem central banks use securities settlement systems to perform the operational processing of the assets put forward as collateral for their credit operations (intraday credit in the RTGS payment systems that make up TARGET2, and overnight credit). Securities settlement systems therefore play an essential role in the implementation of monetary policy.
Central counterparties (or clearing houses)
Clearing financial transactions through the interposition of a central counterparty (CCP) between the initial counterparties reduces any potential losses in the event of a participant’s failure while limiting the number and value of deliveries and transaction-related payments.
However, using these clearing systems also has the effect of concentrating risks on the CCP, giving the latter a systemic importance in the event of its failure. In addition, CCPs are connected to payment systems and may transfer risks onto them, since they are in charge of settling margins and clearing balances.
It is therefore essential that central banks be involved in the oversight of clearing systems given the systemic nature of these infrastructures and the contagion risks they pose.
Finally, in recent years, the integration of financial markets has led to the development of cross-border transactions and to growing requests for strengthening the effectiveness of clearing and settlement systems. In Europe, this movement has taken the form of a consolidation of systems and a search for operational integrations, as well as the development of links between clearing and / or settlement systems, which exposes these systems to heightened contagion risks. This new dimension contributes to increasing their systemic importance in the European Union.
Trade repositories
Trade repositories register derivatives markets transactions in centralized databases. They therefore play an important role in improving transparency on derivatives markets, reducing systemic risks, and promoting financial stability.
The European regulation EMIR (European Market Infrastructure Regulation), and its regulatory technical standards, mandate the reporting of all derivatives transactions to authorized trade repositories since August 2012, whether they are negotiated on a regulated market or over-the-counter. In practice, the reporting of all derivatives transactions on all asset classes is effective since 12 February 2014.
By end-2014, 6 trade repositories established in the European Union had been authorized by ESMA under EMIR, allowing them to offer their services to European counterparties. 4 of them are established in the United Kingdom, one in Luxembourg and one in Poland.