Therefore, as infrastructures are becoming increasingly interlinked, more coordination in the implementation of the default rules is vital for further mitigating risks at the systemic level. Finally, the default of Lehman Brothers was a major showcase for the severe implications of “institution-based interdependencies” between two or more infrastructures resulting from the exposures of major financial institutions participating in each of these infrastructures. Therefore, it is crucial for us to continue closely monitoring the interdependencies between individual institutions in order to assess their impact on the stability of the infrastructure. Infrastructures for OTC derivatives Let me now turn to the need to strengthen the infrastructure for OTC derivatives. OTC derivative markets have been very dynamic with a veritable explosion in outstanding contract volumes primarily over the past decade. The basic problem, however, is that this very dynamic evolution of OTC derivatives markets has outstripped development of the underlying clearing and settlement arrangements. Indeed, as the post-trading of OTC derivatives remained predominantly bilateral and non-standardised, the respective arrangements have become increasingly inadequate for coping with the growing volumes and complexity of OTC derivatives trades. This was highlighted in particular during the financial market turmoil, when higher trading activity and market volatility further aggravated the existing tensions. [The resulting processing backlogs and uncertainties about counterparty risk raised strong concerns among policymakers, as highlighted in the Financial Stability Forum’s April 2008 report 1 on the lessons from the financial turmoil.]

standardisation in cards, payment innovations, a migration end date, and the governance of payment issues at the European level. 4  BIS Review 74/2009  Harmonisation in the field of retail payments is a natural area for efficiency gains. However, the market is moving only slowly in this direction. Although SEPA continues to be a mainly self-regulated project, some elements might need more regulator involvement. The Eurosystem has emphasised that a realistic but ambitious SEPA migration end date is necessary. Such a date would facilitate communication and provide more certainty for all stakeholders. The most viable option for achieving an end date is through regulation by the public authorities. Since an EU regulation is probably the most effective option the Eurosystem appreciates the Commission’s launch of a public consultation on this topic. Only by tearing down the walls of fragmentation can we ultimately bring about harmonisation, efficiency gains and a level playing-field. Such a development inevitably leads to increased competition. I am fully aware that it is not easy – especially in a period of low growth and higher credit risks – to change revenue models. However, those who invest early will benefit and position themselves successfully. Corporates tell us that they would benefit from SEPA services because they are internationally connected. Taking into consideration the renewed relevance of retail payments, the key success factors in the years ahead will be harmonisation, innovation and increased competitiveness. Banks and infrastructures will successfully take up these challenges only by continuing to play an important role in retail payments.