Oversight of payment and securities settlement systems
The Swiss National Bank’s oversight mandate
The National Bank Act requires the SNB to oversee the systemically important payment and securities settlement systems. By overseeing the systems operated by the private sector, the SNB promotes their security and efficiency. In so doing, it gives priority to reducing systemic risk. First, it is important to ensure that an operational or technical system failure will not result in major credit or liquidity problems for financial intermediaries. Second, the legal framework, contractual regulations and, in particular, the rules and procedures for the different systems should be formulated such that payment or delivery difficulties of individual system participants do not encroach on other financial intermediaries. The sole objective of system oversight by the SNB is to ensure financial stability, which in turn is a precondition for the effectiveness of monetary policy. Individual creditor protection, consumer protection or the protection of payment and securities settlement systems from criminal abuse, however, are not objectives of SNB oversight.
Payment and securities settlement systems
A look behind the scenes of the Swiss financial market infrastructure
Roughly speaking, the financial system can be subdivided into three main components: financial markets, financial intermediaries and the financial market infrastructure.
The primary task of the financial markets is to gather information and process it in the form of prices, which allow financial market participants to allocate resources and risks efficiently.
Financial intermediaries are market participants themselves. At the same time, they also play an important role in bringing the other market participants together – in other words, they match supply and demand in the various market segments. In order to fulfil these tasks efficiently, financial markets and intermediaries depend on an adequate financial market infrastructure. Particularly important are stock exchanges and trading platforms, as well as post-trading systems for clearing and settling payments, securities and other financial instruments (payment and securities settlement systems). The task of payment and securities settlement systems is to correctly transfer and record the financial assets (e.g. book money, securities and other financial instruments) traded between the parties and to do so at the time agreed.