Oversight

Increased focus on risks in payment and securities settlement systems
Payment and securities settlement systems are major elements of the modern financial infrastructure. In international forums there has been an increasing awareness of risks in this part of the financial infrastructure and of the role of central banks in that connection.

International cooperation in this area has resulted in a number of reports and recommendations during the last 10-15 years. This is partly due to the fact that the value of the payments handled by the systems has increased considerably.

The recommendations are aimed at preventing one participant's problems in meeting its financial obligations, or problems within the system itself, from spreading to other system participants or other systems in the financial sector. The risk of such a chain reaction is often referred to as systemic risk. The probability of such situations arising is in itself very small, but the potential consequences are considerable.

The role of central banks
All over the world, central banks have been assigned the task of overseeing payment and securities settlement systems. The primary aim is to promote the smooth operation of the systems by contributing to their stability and efficiency. Oversight differs from financial supervision in that it focuses on a given system rather than the individual participants.

The role of Danmarks Nationalbank
In its oversight of payment and securities settlement systems, Danmarks Nationalbank relies on internationally approved standards and recommendations. Danmarks Nationalbank, together with the system owners, reviews the Sumclearing system and the VP system, both of which are considered systemically important. Consumer and competition aspects are not included in Danmarks Nationalbank's oversight. In addition, Danmarks Nationalbank ensures that its own KRONOS system meets the international standards.

Danmarks Nationalbank's oversight does not limit the responsibility of system owners, operators and participants to ensure that systems meet the requirements, including operational aspects. Likewise, oversight is not in itself an approval of the systems.

In addition to cooperating with system owners, Danmarks Nationalbank works together with other central banks and other relevant Danish and foreign authorities. The Danish Financial Supervisory Authority and Danmarks Nationalbank have entered into a cooperation agreement relating to payment and securities settlement systems. Danmarks Nationalbank reports on its oversight activities in its own publications.