Payment systems

The Eurosystem and securities clearing and settlement systems

Central banks, as promoters of financial stability, pay close attention to the smooth functioning of securities clearing and settlement infrastructures. These systems are key elements for the financial markets, because if they suffer a problem this can affect the whole of the financial system due to the systemic risk they present. The central banks of the Eurosystem also provide cash settlement services and are users of these systems.

Securities clearing and settlement systems settle the cash from securities transactions in the payment systems managed by central banks, or in other words, in the cash accounts that participants maintain on their books (central bank money). Any incident or problem in securities clearing and settlement systems during settlement has a direct effect on payment systems.

As users, central banks also play a significant role, because they employ securities settlement systems to execute financing, monetary policy and intraday credit transactions. Most of these operations are guaranteed by securities registered in said systems. If these systems function incorrectly, this could present a considerable risk to central banks' financing policy and hence to the financial system as a whole. For this reason, the Eurosystem carries out periodic assessments on securities settlement systems and their links, in keeping with standards established by the Eurosystem itself. Compliance with said standards authorises them to be used by central banks when undertaking securities transactions.

Banco de España, as a member of the Eurosystem, takes part in all the activities carried out by the latter in the securities industry and collaborates with other central banks and the securities regulators in this field. Among its recent activities, it is worth mentioning the drafting of recommendations on securities settlement systems and central counterparty institutions, a task performed by the joint group comprising the European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR), in May 2009.

Banco de España is also a member of other international forums which co-ordinate the recommendations of the G-20 meeting held in 2009 in Pittsburgh concerning OTC derivatives. One example is the OTC Derivatives Regulators' Forum (OTCDRF) which has been set up to enable information to be shared between the authorities involved and to foster collaboration agreements for the surveillance of existing infrastructures and those arising on the OTC derivatives market (central counterparty institutions and trade repositories).

On a national level, Banco de España collaborates closely with the National Securities Market Commission (CNMV) within the co-operation framework established between the two institutions.