And an essentially sectoral solution, where payment system overseers and securities regulators do not co-operate in an integrated way, is inappropriate. Therefore I welcome the second Giovannini Report which provides an excellent view on how efficiency gains and further risk reduction in the field of securities clearing and settlement systems should be achieved. In Switzerland as in several other countries oversight of clearing, payment and settlement systems is still work in progress. A draft of the revised National Bank Law has been submitted and is being discussed in Parliament. The revised law will presumably enter into force in May 2004. It is intended to explicitly vest the responsibility of overseeing payment systems as well as securities clearing and settlement systems with the Swiss National Bank (SNB). 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 market utilities are of considerable systemic importance. The SNB, however, can only fulfil this expanded mandate by closely co-operating with other authorities. Domestically the SNB will work hand-in-hand with the Swiss Federal Banking Commission (SFBC), our banking supervisor. The SNB will focus on systemic issues while the SFBC will deal with institutional aspects. This job-sharing is based on the premise that each authority will be able to make use of its comparative advantage.

However, since the price of the high quality good or services lies above that average price the seller who has high quality items will withdraw from the market. Therefore only a market for medium and low quality goods will emerge. Consequently most buyers will be disappointed and the high quality suppliers will be frustrated. Ultimately this might even lead to an extinction of the market for those goods and services the quality of which cannot be correctly assessed by buyers. To eliminate this breakdown of market exchange due to adverse selection quality screening is required. Market utilities such as CSDs, ICSDs or CCPs contribute to soften the problem of adverse selection. Indeed, these utilities may monitor their participants by defining financial and technical criteria to be met permanently. This ensures a certain quality of the participants. For example I may refer to Central Counterparties who have long recognised the value-added of such a monitoring function. As you know, CCPs replace numerous bilateral counterparty risks that market participants face through a single counterparty risk towards itself. This transfer of risk tends to be efficient since the CCP is best positioned to monitor the risks of all the participants of the system. Another means to soften the problem of adverse selection is the provision of delivery-versus-payment mechanisms since they eliminate principal risk in securities settlement. All in all, market utilities that ensure a certain minimum quality of the participants and reduce principal risk contribute to limiting the damage of adverse selection.