If I may quote from John Exter’s Report of 1949 on the establishment of the Central Bank of Ceylon, (the former name of the present Central Bank of Sri Lanka), it states “It is the monetary, financial and payment systems that facilitate the flow of money in the economy and as such, the Central Bank of Ceylon undertakes a great responsibility in promoting the economic well-being of the country”. Although modern central banks concentrate primarily on price stability and financial system stability, these objectives cannot be satisfactorily achieved without simultaneous development in the payment systems. Therefore, at some stage, all central banks have to  BIS Review 35/2008  1  pay attention to payment system development, although it was taken for granted by many until recent times. 5. Advances and transformation in payment systems development  5.1 Payment systems have undergone profound changes in recent years, primarily in terms of the increased complexity of the production and differentiation of payment services offered to customers nationally, regionally and internationally. Payment systems are evolving towards an evermore universal and sophisticated level of operation. In both wholesale and retail areas, new technologies, new participants and new alliances are beginning to transform the payments system landscape. This transformation is largely due to developments in information and communication technology, and integration and globalization of financial markets at the regional and international level. 5.2 One by-product of this transformation is the blurring of the distinction between wholesale and retail activities.

However, for those banks with large client clearing volumes, disallowing client initial margins to compensate for potential future exposure may inevitably create constraints on their leverage ratios. This can dis-incentivise the provision of such client clearing services. This may have created an unintended impact on the market’s incentives and overall ability to centrally clear, which will be inconsistent with the objectives of the central clearing. Therefore, in the next phase of our work on the reforms, sector regulators will have to work closely towards greater consistency and coherence with the inputs of all market participants. Balancing between domestic market concerns and international market access 13. As each jurisdiction embarks and complete rebuilding its part of the global house, it is also important to consider how domestic rules would operate and interact across borders and against the global standards. 2/3  BIS central bankers' speeches  14. The recent comparability determination between the CFTC and the European Commission on platform trading and margins for un-cleared derivatives serves as an excellent example of how authorities have worked together to reach a common agreement and approach, bridging the requirements of two major regulatory regimes. Asia-Pacific authorities are working closely with one another as well, and also with the CFTC and EC, to address cross-border issues. Japan’s FSA (Financial Services Agency) and Australia’s APRA (Australian Prudential Regulation Authority) had also announced their recognition of various jurisdictions’ margin requirements for un-cleared derivatives, including Singapore and Hong Kong. 15.