With several layers of service providers, risk increases while at the same time becoming more difficult to uncover. In 2015, Norges Bank will evaluate the outsourced operations of key participants in the financial infrastructure in Norway. This assessment, too, will be based on international principles. 8 A fundamental prerequisite is that the owners of systems have the ultimate responsibility for operation. This responsibility also covers backup solutions. The owners’ responsibility does not change because all or parts of system operation are managed by others. Owners must therefore retain sufficient expertise in-house. Both for the system owner and the authorities, the ability to set requirements and follow up activities is more of a challenge the more remote they are. When parts of the financial infrastructure are operated outside of Norway, system owners should implement special measures to address these additional challenges. A situation must be avoided where infrastructure critical to Norway is affected by incidents in other countries. Norges Bank will give weight to these considerations in its supervisory role. Contingency preparedness The consequences of disruptions in a payment system may be more serious for society than for the individual operator. For that reason, the authorities set strict requirements for contingency preparedness. Contingency arrangements shall both reduce the likelihood of incidents and mitigate the consequences if an incident has occurred. The requirements for contingency preparedness may entail increased costs in the short term. In the longer term, adequate contingency preparedness is crucial for society. This is reflected in the trade-offs between long-term risk and short-term costs.

(2014): “Central banks and payment systems: The evolving trade-off between cost and risk” and Norman’s comments at Norges Bank’s conference “Of the uses of central banks: lessons from history”, 5–6 June 2014. BIS central bankers’ speeches  1  Allow me to give two examples. Just before the turn of the millennium, Norges Bank introduced a real-time gross settlement (RTGS) system that allowed large payments to be settled far faster than earlier. This also resulted in less uncertainty and lower risk. Another example is the introduction of the foreign exchange settlement system CLS just over ten years ago. Before CLS was established, one party could risk paying his leg of a trade without receiving anything from the counterparty. With CLS, this counterparty risk was eliminated. In both cases, the introduction of the new systems increased costs for private participants. This prompted criticism. But over time, the reduction in risk has more than offset the increase in costs. The financial crisis in autumn 2008 showed that the gains were real. Where there were adequate settlement systems without counterparty risk, markets functioned better. The core of the Norwegian payment system is the Norwegian Interbank Clearing System (NICS) and Norges Bank’s settlement system (NBO). On average, over NOK 200 billion passes through NBO each day. Without this system, payments in Norway would come to a halt. This would quickly have serious consequences. Norges Bank therefore has a target of 100-percent availability for the settlement system during opening hours. In recent years, the Bank has been successful in ensuring this.