committee on payment and settlement systems 1 the role of central banks in retail payments robert...
Post on 13-Dec-2015
217 Views
Preview:
TRANSCRIPT
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
1
The role of central banks in retail payments
Robert LindleyDeputy Head, CPSS Secretariat
Regional workshop on reforming payment and securities settlement systems for the Middle East and North AfricaBahrain, Thursday 17 March 2005
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
What are retail payments?
Low values, large numbers Used by everybody Wide range of contexts Wide range of instruments
Compared to large-value payments: large values, small numbers, mostly by financial institutions for market transactions, mostly credit transfers
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Is there a real difference?
More a matter of degree A payment is a payment is a payment ….. Retail is more diverse But key issue is cost: speed and security In the future, cheaper IT may make this matter
less Some RTGS systems already handle retail
payments in “off-peak” hours
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Central bank approach to payment systems
Payment systems are important Normal philosophy: “markets work best” But sometimes there are market failures
Negative externalities (especially systemic risk)
Network effects
Monopoly
May justify central bank “intervention”
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Forms of “intervention”(or “modes of engagement”) Service provider and operator
settlement accounts (settlement asset) system operator
nb: some operational involvement does not reflect current market failures but, instead, past failures or a different “philosophy”
Catalyst (may be part of oversight)
Overseer
“… a function whereby objectives of safety and efficiency are promoted by monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change” (forthcoming CPSS report on oversight)
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Central bank policy objectives
Intervene to achieve what? Some common ground: safety and efficiency What is the focus of these two objectives in the
case of retail payment systems?
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Efficiency
All payment systems
Significant costs are involved Economic needs must be met So important choices must be made
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Safety
Systemically important payment systems – potential for systemic riskFinancial, legal, operational risks
Retail payment systems – importance to economic activityOperational risks – security and operational reliability
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
A difference of emphasis:
Although all central banks have safety and efficiency objectives, some
- give primacy to safety
- interpret “safety” to mean “systemic risk” only
and thus do not actively oversee and/or operate retail systems
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Trends in retail payments with possible policy implications
Pace of change is relatively slow – consumer conservatism, need to reach interbank agreement, costs, need for new laws etc
IT innovations (eg paper to electronic) Cross-border developments (eg euro area) Market structure changes (eg consolidation) New participants (eg non-banks)
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Policy issues
Implications for efficiency are generally favourable (although may need to draw a distinction between benefits for banks and those for customers) but risk implications are often unclear.
Legal and regulatory Market structure and performance
(balance between competition and cooperation) Market infrastructure and standards
(technical issues) Central bank services
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Legal and regulatory issues
Legal and regulatory provisions may fail to keep pace with payment innovationeg e-money, electronic signatures, cheque truncation
Inadequate safeguards against criminal use Cross-border payments may be a problem Legal and regulatory provisions may create
unwanted entry barriers (eg for non-banks)
Any issue where laws and rules are drafted for instruments, systems or participants that are no longer completely relevant
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Market structure and performance
Balance between cooperation and competition– competition usually good for innovation and efficiency
– but too much competition may cause risk
– and competition needs to be tempered with cooperation
– but too much “cooperation” may cause inefficiencies (eg access restrictions, lack of innovation)
Demand as well as supply: transparency of service and price …
… and structure of pricing
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Market infrastructure and standards
Adequate security Adequate operational reliability Standards, especially for interoperability Governance structures
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Central bank services
Need to keep pace with market developments Facilitate innovation and competition?
eg access, providing credit, operating hours
Contain moral hazard and credit risk? Transparency
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Public policy goals
Policies should be designed to: address legal/regulatory impediments foster competitive market conditions and behaviour support development of effective standards and
infrastructure provide central bank services effectively
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Recommended minimum actions by central banks
Actions will depend on the central bank’s responsibilities the seriousness of any market failures relevant to
those responsibilities the available tools (under the
operate/catalyst/oversee headings)
Minimum actions are Monitoring Cooperate and advise (re the market and re other
authorities) - catalyst role
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Possible additional actions
More proactive catalyst/facilitator activity Intervention as overseers Intervention as service providers and operators
Depending on market conditions and on central banks’ responsibilities and powers
COMMITTEE ON COMMITTEE ON PAYMENT AND SETTLEMENT SYSTEMSPAYMENT AND SETTLEMENT SYSTEMS
Summary
A first attempt to find common policy themes Common objectives Diversity of central banks’ current involvement Policy issues arising out of current market trends –
not everywhere at the same time Central bank actions – recommended minimum
actions and possible additional actions
top related