B. Standard-setting activities
The standards published by the Committee, which are the Core principles for systemically important payment systems, the joint CPSS/IOSCO Recommendations for Securities Settlement Systems and CPSS/IOSCO Recommendations for Central Counterparties, have contributed to improving risk management practices in payment and settlement systems. The reports provide the main principles for the design and operation of such systems, and are used as a reference by central banks and international organisations in their efforts to improve the safety and efficiency of payment systems worldwide. They are part of a set of key standards that the international community considers essential to strengthen and preserve financial stability (see the "compendium of standards" published by the Financial Stability Forum, http://www.fsforum.org). As such, these standards are also used by the joint IMF/World Bank "Financial Sector Assessment Programme" (FSAP) and the "Reports on the Observance of Standards and Codes" (ROSC).
All standards have been prepared by task forces comprising experts from both industrialised and emerging market economies, as well as the IMF and the World Bank3, and have been submitted to public consultation to achieve an international consensus.
The Core principles for systemically important payment systems were published in January 2001. They emphasise the importance of "systemically important" payment systems. If such systems are insufficiently protected against risk, disruption within them could trigger or transmit further disruptions amongst participants or systemic disruptions in the financial area more widely. Systemic importance is determined mainly by the size or nature of the individual payments or their aggregate value. Systems handling specifically large-value payments - mostly interbank transactions - would normally be considered systemically important.
The CPSS and the Technical Committee of IOSCO jointly published in November 2001 the Recommendations for Securities Settlement Systems, which concern the design, operation and oversight of securities settlement systems, and promote the implementation of measures that improve the safety and efficiency of such systems. The recommendations cover both individual systems and cross-border securities settlement arrangements. This report is supplemented by an assessment methodology, published in November 2002.
The CPSS and the Technical Committee of IOSCO also jointly set out a comprehensive list of standards for central counterparties, the entities which interpose themselves between counterparties in a financial transaction, becoming the buyer to the seller and the seller to the buyer. The Recommendations for central counterparties (May 2004) cover the major types of risk a central counterparty faces and includes an assessment methodology.
3 In the case of the Recommendations for Securities Settlement Systems, the IMF and the World Bank only participated in preparing the Assessment methodology.
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