central bank to effect payment is generally regarded as risk free, service is assured even in extraordinary times of global and domestic crises, while using the central bank as a hub ensures that payment systems ’ participants are not forced to rely on actual or potential competitors for payment. these arguments that were compelling at the dawn of central banking are most likely to ensure that modern payment systems continue to have a determined impact upon monetary policy and a positive influence upon the stability of the financial system as whole. thank you for your attention. bis central bankers ’ speeches

dimitar bogov : modern payment systems ’ impact on monetary policy and financial stability welcome speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the 16th international conference of clearing institutions in central and eastern europe ( icci ), skopje, 12 october 2011. * * * mr. chairman, dear participants and guests, it is an honour and pleasure to give a welcome speech to such a distinguished audience. i thank klirinski interbankarski sistemi skopje ( kibs ) for this opportunity. my topic will be the link of payment systems with the two main central - bank tasks of monetary policy and financial stability. while money needs to circulate freely through the economy, without imposing excessive burdens, other economic agents also need to be confident that commercial banks will honour their sight liabilities by converting them into banknotes, i. e. central - bank money, at their demand. the central bank allows commercial banks to transfer among them funds held in accounts with the central bank. the development of a payment system is thus part of the development of a central bank and out of this operational capacity grew the cooperation with the commercial banking system when setting - up the facilities it operates and overseeing the facilities other participants operate. this pivotal role of the central bank, unmatched by any other participant, does make us humbly aware of the strong link between payment systems and monetary policy on one hand, and payment systems and financial stability on the other. let me devote the central part of this welcome speech to these different, yet interrelated links. monetary policy impulses are transmitted from those financial institutions that have a direct relationship with the central bank to other institutions and households. the central bank typically conducts its monetary policy only with designated financial institutions, mostly commercial banks rather than with other economic agents. as a result other economic agents rely on the designated financial institutions that have a direct relationship with the central bank. the functioning of the transmission relies on the smooth functioning of payment infrastructures enabling transactions of these institutions with the central bank, as well as amongst themselves at the interbank market. if the operation of payment systems is underdeveloped, these designated financial institutions choose to keep a relatively large buffer of central - bank money to help them manage their liquidity, which in turn leads to weaker than intended monetary - policy impulses from the central bank. but in general, after the payment systems in the economy have reached a certain threshold,