And an essentially sectoral solution, where payment system regulators and securities regulators do not cooperate in an integrated way, is inappropriate. Indeed, all official and private sector initiatives that can give an impetus to this debate are highly welcome. The CPSS-IOSCO Recommendations for Securities Settlement Systems, the ISSA Recommendations 2000, and the Group of Thirty’s ongoing work all contribute to improving our understanding of the challenges we face. And it is only when issues are really understood that appropriate responses can be formulated and implemented. In Switzerland, as in several other countries, supervision of the securities clearing and settlement system is still work in progress. A draft of the revised National Bank Law has been submitted and will be discussed by Parliament in the near future. The revised law will presumably enter into force around 2004. It is intended to explicitly vest the responsibility of overseeing payment systems as well as securities clearing and settlement systems in the Swiss National Bank. The revised law will thus formally express that an efficient and secure financial market infrastructure is imperative for the implementation of monetary policy and for the stability of the financial system. The inclusion of clearing and settlement systems follows from the obvious fact that, given their linkages, these infrastructural functions are of considerable systemic importance. This is all the more true since the SNB has, for a few years now, implemented its monetary policy exclusively through repo transactions. The SNB can fulfil this expanded mandate only by closely cooperating with other authorities.

In the field of financial market infrastructure, there is no alternative to close cooperation between private market players and oversight authorities. On the one hand, it makes sense in this field as well to rely on market forces to stimulate, as energetically as possible, an eagerness for progress and innovation. On the other hand, we have to take into consideration that there are economic forces working in this area that limit the free play of market forces and require oversight authorities to take on a more active role. First, clearing, settlement and payment systems entail network characteristics with potentially negative externalities not internalised by individually optimising market players. It is thus the aim of oversight authorities to take into account the financial infrastructure as a whole, thereby focussing on the links between all components. In other terms, some of these systems are “too interlinked to fail” and must therefore be overseen with special care. Second, since clearing, settlement and payment services are based on production processes with very high fixed costs, there is a risk that consolidation may lead to a monopolistic market result. Oversight authorities must therefore also make it their goal to prevent potential abuses of market power. Against this background, a trust-based cooperation between financial service providers and oversight authorities remains the key to a continued successful development of an efficient and secure financial market infrastructure that meets the fast-changing needs of the future. BIS Review 37/2002  7