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To reduce the risks that arise from interconnectedness in the financial system, the Committee on Payment and Settlement Systems [15] (CPSS) and the Technical Committee of the International Organization of Securities Commissions [16] (IOSCO) have launched a comprehensive review of their existing standards for financial market infrastructures such as payment systems, securities settlement systems and central counterparties.

There are three sets of standards involved, namely:

• the 2001 Core principles for systemically important payment systems [17]

• the 2001/2 Recommendations for securities settlement systems [18]

• the 2004 Recommendations for central counterparties [19]

Financial market infrastructures generally performed well during the recent financial crisis, and did much to help prevent the crisis becoming even more serious than it actually was. Nevertheless, the committees believe that there are lessons to be learned from the crisis and, indeed, from the experience of more normal operation in the years that have passed since the standards were originally issued. It thus seems timely to review the standards with a view to strengthening them where appropriate.

Robust financial market infrastructures make an essential contribution to financial stability by reducing what could otherwise be a major source of systemic risk. Moreover, insofar as they enable settlement to take place without significant counterparty risk, they also help markets to remain liquid even during times of financial stress.

The review will be led by representatives of the central banks that are members of the CPSS and those of the securities regulators that are members of the IOSCO Technical Committee. The International Monetary Fund and the World Bank are also participating in the review. The committees will coordinate with other relevant authorities and communicate with the industry, as appropriate, as the work progresses. They aim to issue a draft of all the revised standards for public consultation by early 2011.

The CPSS and the Technical Committee of IOSCO announced last year that they are already in the process of providing guidance on how the 2004 Recommendations for central counterparties should be applied to CCPs handling OTC derivatives. The guidance will also cover other relevant infrastructures handling OTC derivatives such as trade repositories. This aspect of the work has been put on a fast track because of the new CCPs for OTC derivatives and trade repositories that have recently started, or are about to start, operating. A consultative document on the guidance will be issued within the next few months. This new guidance will not entail amendments to the existing recommendations for CCPs but will of course be incorporated into the general review of the standards that has now begun.

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