So far, this contribution has consisted in developing and applying an oversight framework for retail payment systems, which contributes to establish safety and efficiency guidelines for the expected integration and consolidation of retail payment systems in the context of the SEPA project. The need that the payment systems’ regulatory framework keeps pace with the structural changes underway in Europe is likely to lead the Eurosystem’s central banks to develop further their involvement as overseers, at least in two directions. The first direction is the updating of the existing oversight requirements to new market realities. Work has already started in that respect. For instance, the Eurosystem is currently revising the oversight standard for systemically important payment systems relating to operational risk. This is because discussions and initiatives in order to strengthen business continuity management have taken place mostly at national level and have not systematically considered that the financial system of the euro operates as a euro area-wide network of interrelated markets, market infrastructures and participants. Therefore, the Eurosystem is preparing a revised version of its business continuity expectations for systemically important payment systems that should be integrated soon into its oversight policy framework. The transformation of the payment infrastructures landscape in Europe should also logically lead to an updating of the oversight framework for retail payment systems. In particular, retail payment systems are about to become interoperable and face a consolidation process, which is likely to lead to the establishment of links between systems.

TARGET2, which is due to go live at the end of 2007, will further improve the degree of integration of wholesale payment infrastructures and will represent a major step forward in their consolidation. It will provide to its users fully harmonised settlement services and prices across Europe, supported by a single shared platform. An important issue which is now under consideration is how TARGET2, as “backbone” of the euro market infrastructure of the euro, can best contribute to the integration and consolidation of the securities settlement systems with which it is going to interact. Should TARGET2, as announced by the Eurosystem and implemented in the system’s specifications, support a wide range of interaction  BIS Review 53/2006  1  modes in order to foster competition between systems and let market forces select the most efficient one (i.e. the so-called no prohibition no compulsion principle) ? Or should TARGET2 influence that selection process by limiting the interaction modes to only one in a long-term perspective? It goes without saying that in the latter case the Eurosystem, given its statutory responsibilities, can only select the most efficient interaction model, namely a model of settlement of cash and securities, which is in real time as it is the case in the US for instance, and which is integrated in a single platform. In the segment of retail payment systems, the situation is quite different. Retail infrastructures are still separated by national borders and characterized by a high degree of diversity.