- currency netting schemes, and are referred to as the lamfalussy standards, after the chairman of the committee on this study. as these standards can apply to domestic clearing systems, they are being used recently in many countries as guidelines for improving the integrity of private clearing systems. in japan, it has recently been decided to enhance the safety measures of the foreign exchange yen clearing system so as to satisfy the lamfalussy standards. the bank will continue to actively support the initiatives to improve the safety of the payment and settlement systems. d. improving the safety of the central bank ’ s settlement system real - time gross settlement the need to improve safety applies not only to private clearing systems but also to the settlement systems operated by central banks. in this regard, an increasing number of central banks have been adopting real - time gross settlement for current account settlements at the central bank. real - time gross settlement - called rtgs for short - is a system in which the central bank processes and effects every payment instruction sent by private financial institutions in real time and on an order - by - order basis. most central banks, including the bank of japan, have typically conducted interbank settlements on a designated - time basis rather than by rtgs. in the conventional designated - time settlement, payment instructions are accumulated until designated settlement times instead of each one being settled immediately. at the designated time - at present, 9 a. m., 1 p. m., 3 p. m., and 5 p. m. in japan - the net settlement position of each financial institution is computed and its account is credited or debited simultaneously. in designated - time settlement, financial institutions need only the funds equivalent to their net debit positions at the time of settlement, and thus, it is an efficient system from the viewpoint of fund management. however, if a single financial institution in the system were to fail to meet its obligations, all payments would inevitably be suspended, in order that all the payment instructions sent or received by that financial institution could be revoked to recompute the settlement obligations of each financial institution. in addition, such failure could create a shortage of funds at the financial institutions which had planned to make payments with the funds they had expected to receive from the failed financial institution. this may lead to a series of liquidity shortages or defaults - that is, the materialization of systemic risk. the effects of this risk could be grave, considering that the amount of funds handled by the central bank

, neither economists nor economic agencies had a full understanding of housing market speculation and they were unable to arrive at a correct prediction of the outcomes resulting from banks ’ behavior and their competitive structure. although central banks are not free of such criticism, the greatest change since the recent crisis is that their role and position have been heightened as they have been actively involved as lenders of last resort in overcoming the crisis. on the other hand, however, the possibility has also increased that central banks will face a paradox of credibility due to the conflict between their policy goals of achieving both financial system stability and price stability. in this regard, central banks, as the guardians of the financial system, are called upon by society to undertake the task of analyzing and examining macro - prudential policies and regulations. in line with this trend, the bank of korea was given responsibility for financial stability under revised legislation this august, so that it is now better placed to exercise its financial stability function more actively. hopefully, this seminar will provide an opportunity for central banks from around the world in the light of their particular economic situation to come up with wide - ranging ideas on how to cope most effectively with capital flow volatility. bis central bankers ’ speeches