of jgb trading and their settlement. the other is to widen the use of a ccp and the reinforcement of its risk management that is commensurate with the wider use. a. shortening of jgb settlement cycle first, let me talk about the issue of a settlement cycle of jgbs ( chart 2 ). since the late 1990s, a shorter settlement cycle for jgb transactions has been a major goal in the reform of japan ’ s securities settlement systems. the longer the time - lag between trading and settlement, the more unsettled positions, leading to a build - up of settlement risk. actually, the risk became imminent in the financial crisis of autumn 2008, when the failure of lehman brothers resulted in a significant amount of settlement failures in the delivery of jgbs. market participants who had entered jgb trading with the failed financial institution had to go through time - consuming procedures for terminating unsettled transactions and replacing them with new ones in the markets. those events highlighted the importance of reducing the time - lag between trading and settlement and led market participants to establish a working group under the japan securities dealers association in order to identify and examine the issues related to a shorter settlement cycle for jgb transactions. based on the study by the working group, the jgb market moved to the shorter settlement cycle, from t + 3 to t + 2, in april 2012. there are on - going efforts by market participants toward a shorter settlement cycle with an aim of achieving t + 1 for jgb transactions by the earliest possible time after 2017. the issues currently being reviewed include possible changes to trading practices and the creation of a market - wide infrastructure for collateral management. in addition to the dvp is a mechanism which ensures that “ a delivery of securities occurs if, and only if, payment occurs. ” dvp mechanism eliminates the principal risk associated with settlement of a securities transaction, which sometimes results in a large - scale loss. compared with dns, rtgs substantially reduces systemic risk. systemic risk materializes when one participant fails to settle its transactions, especially in a dns system. dns is a settlement mode which effects settlement of transactions among counterparties on a net basis at designated times. in conjunction with those improvements in the safety of jgb settlement, a number of improvements have been made in terms of the efficiency of jgb trading and settlement, including ( 1 ) the introduction of market practices on the bilateral netting and fails - to - deliver

markets around the world. the outstanding balance of jgbs is fairly close to that of the u. s. treasuries, but the u. s. treasuries are currently used as collateral much more widely in global financial markets. if we look at the bright side of this, jgbs have much room for expanded use as collateral in global financial markets. more broadly, various initiatives are already underway to achieve more efficient and convenient settlement systems, in particular with respect to cross - border settlements. in the asean + 3 region, market participants and the authorities, including central banks, are working to improve cross - border securities settlement infrastructure in their efforts to stimulate cross - border securities transactions in the region. in europe, international central securities depositories are upgrading their global collateral management services that help mobilize collateral assets across borders. in japan, as i mentioned earlier, market participants are reviewing the case of developing a collateral management infrastructure that will support the achievement of the shorter settlement cycle for jgbs. such a collateral management infrastructure, if established, will also provide leverage in the improvement of cross - border settlements of jgbs in the future. combining those initiatives in japan and abroad, the bank of japan ’ s efforts to improve its payment and settlement systems will be one piece of the puzzle to make global settlement infrastructure safer and more efficient, and hopefully contribute to the growth of the japanese and global economies. b. central bank cross - border collateral arrangements now, let me talk about another example of the enhancement of cross - border settlement infrastructure, which is a cross - border collateral arrangement for jgbs among central banks. the bank of japan has been collaborating with other central banks to establish such arrangements, where a foreign central bank provides liquidity in its local currency against jgbs to its counterparty financial institutions, using the bank of japan as a custodian for receiving jgb collateral from those financial institutions. the bank has been working with asian central banks to establish such cross - border collateral arrangements. for example, we worked with the bank of thailand to establish an arrangement for providing the thai baht liquidity against jgbs, which has been put into effect since november 2011 ( chart 6 ). in addition, we have made an agreement with the monetary authority of singapore and separately with the bank indonesia to establish similar arrangements. 5 with those arrangements, japanese banks and other financial institutions will have additional sources of local currencies from local central banks in stressed funding conditions