Philipp Hildebrand: Lessons from the crisis for global financial market
infrastructure
Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of
the Swiss National Bank, at the Zermatt Symposium, Avenir suisse, Zermatt, 25 August
2009.
The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch).
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The financial market infrastructure, in other words, the systems for trading, clearing and
settling payments and financial instruments, is essential for the operation of the financial
system. Thus far in the financial crisis, financial market infrastructure has stood up well
overall and helped to prevent the existing uncertainty in the financial system from becoming
even greater. This holds true both for payment and settlement systems in Switzerland and for
the global financial market infrastructure.
However, time and again, it becomes apparent that the infrastructure for clearing and settling
transactions is not keeping up with rapidly growing financial markets. In recent years, this
has been most obvious in the OTC derivatives market. Pressured by supervisory authorities
and central banks, market participants are now developing safer and more efficient clearing
and settlement arrangements for OTC derivatives. These efforts include the establishment of
central counterparties, which facilitate market participants' risk management, promote market
transparency and reduce the complexity of the financial system. To the extent that the
market infrastructure reduces the interconnections between individual financial institutions, it
contributes to the long-term strategy aimed at finding ways of liquidating large and complex
financial institutions in an orderly way.
From a regulatory perspective, it is important to note that responsibility for ensuring that
payment and settlement systems work smoothly and meet the requirements of the financial
industry lies with the system operators and market participants. The role of regulatory
authorities is to establish certain guidelines, especially for infrastructures that are of critical
importance for the stability of the financial system, and to intervene rapidly in cases where
market forces do not provide an adequate infrastructure.