that they are not reasonably able to identify or manage. our second driver comes from our ongoing work on bank failure management, which some of you will be familiar with. while we are not expecting any banks to fail, we do want to be in a position to discharge our legal responsibilities if one does get into trouble. and one of the things we may well want to do is to continue to operate a bank in statutory management, and keep it as a full participant in the payment system. we also need to be able to act quickly in respect of transactions that are in the various pipelines at the point where a statutory management is declared. to do this, we potentially need fast access to new zealand management, technological and payment system resources. i noted earlier the complexity of the payment system overall, and i don't think that some of these questions have particularly easy answers. we are addressing some of them through our outsourcing policy, but others are likely to require alternative approaches, and some further co - operation with the industry. the goals include ensuring that key systems are designed to be " high availability " ones ; that robust back - up arrangements are in place wherever feasible ; that business continuity plans are effective and mutually consistent ; and that rapid decision - making and communication capability is readily available. for us, this is very much " work in progress " at this point. legislative powers finally, in talking about regulation, i should note that in 2003 the reserve bank was given some formal legal jurisdiction over the payment system for the first time, in a new part 5b of the reserve bank act. the powers basically give us the right to obtain and publish information, and thus to throw a spotlight on any issues of public interest. they do not give us the kind of authority to scrutinise and determine prices, for example, that the payment system board has in australia : here, that kind of role is performed by my former colleagues in the commerce commission, and we are very comfortable with that division of labour. the reserve bank is an advocate for competition and suitably - open access rules in the payment system. in practice the new legislation provides a more formal basis for the kinds of things we have been doing, and does not signal any change in direction. we decided recently to publish the principles we would follow in our payment system oversight work, and these have been put on our website today. you will be able to read them there, so i won't go into them in detail. they

this technology. more recently, the use of pc - banking and the internet to initiate transactions have been growing rapidly in popularity. cheques are progressively disappearing, but - contrary to longstanding predictions of a " cashless society " - the use of currency has continued to grow. in the wholesale markets, the kiwi interbank transfer system ( kits ) began in 1987, to handle electronically some payments between the four big banks. it was replaced in 2000 by the same - day cleared payment service ( scp ), which can handle interbank payments and payments between bank customers on a real - time basis. in 1990, the reserve bank commenced to operate the austraclear system under licence. this system, as you know, provides a depository for debt and equity securities, the facility to transfer these securities on a real - time delivery - versus - payment basis, the facility to make cash payments, and a platform for the automated provision of intra - day liquidity to the banking system. settlements amongst the banks in respect of each day's transactions used to take place on the books of the reserve bank - everything was netted down to a single number that each bank either owed to the system, or was owed by the system, and the banks'accounts at the reserve bank were debited and credited accordingly. no doubt this procedure started with a ledger, a clerk and a quill pen, and it didn't change much until 1998 when the electronic exchange settlement account system ( esas ) was introduced. this system enabled three main changes : • large interbank transactions could now be settled on the reserve bank's books at any time during the day, without having to wait until the end of the day, and without having to be included in the end - of - day netting wash - up. this is called real time gross settlement ( rtgs ) • austraclear transactions were now also settled using esas, giving the securities market delivery - versus - payment in central bank money ( austraclear had previously been dvp in commercial bank money ). new zealand was one of the earliest countries in the world to achieve this outcome. • reserve bank operations to provide intra - day liquidity to enable these real - time transactions were automated though an " autorepo " facility finally, late last year, the new zealand dollar entered the cls system, which provides a payment versus payment service for settling foreign exchange transactions. this substantially reduced the largest remaining settlement risk