The Committee on Payments and Market Infrastructures (CPMI) has published its work programme for the first time.
The CPMI, whose membership comprises senior officials of 28 member central banks, said in a press release that it was publicly releasing its agenda as part of a ‘commitment to increased transparency’.
Its programme, which is for 2021-2022, outlines the CPMI’s priorities for its monitoring and analysis, policy and standard-setting and implementation work under two themes: ‘shaping the future of payments’ and ‘evaluating and addressing risks in financial market infrastructures’. Both topics have mounting importance to governments and financial markets given the disruption – and also opportunities – caused by the trend towards digitalisation.
In respect of payments, the CPMI – whose secretariat is housed at the Bank for International Settlements (BIS) in the Swiss city of Basel – says it will continue to work towards improving cross-border payments and address policy issues arising from digital innovations in payments, such as the hot topics of central bank digital currencies (CBDCs) and stablecoins.
In respect of financial market infrastructures (FMIs), its focus is on issues related to central clearing and other issues that ‘emerged or were accentuated’ during the Covid-19 pandemic.
‘Digitalisation and general improvements in payments have cast light on long-standing issues in cross-border payments: they are still slow, expensive, opaque and not inclusive,’ the work programme states.
BIS itself is involved in numerous projects to improve things: for example, the BIS Innovation Hub and the Monetary Authority of Singapore (MAS) just last month presented a blueprint – ‘Project Nexus’ – for international payments plumbing which, they say, would enable cross-border payments to flow ‘as quickly as sending a text message’. The blueprint includes technical standards and operational guidelines for a scalable network that would connect national instant payment systems, enabling cross-border payments to reach their destination ‘within 60 seconds’.
The G20 made enhancing cross-border payments a priority during the 2020 Saudi Arabian Presidency, with a Financial Stability Board (FSB) roadmap – ‘Enhancing Cross-Border Payments’ – presented to the G20 last October. The CPMI, which is leading or co-leading 11 out of 19 ‘building blocks’ of the roadmap, says in its work programme that it will ‘continue with highest priority the work on cross-border payments, in close co-ordination with the FSB and other stakeholders’.
The CPMI’s programme also says that, in order to support broader work on cross-border payments, its members will ‘continue to monitor’ de-risking in correspondent banking in co-operation with the FSB. In the context of cross-border payments, a correspondent bank provides local account and payment services for banks located abroad.
The CPMI also states that it will, together with the Madrid-headquartered International Organisation of Securities Commissions (IOSCO), ‘further analyse and address’ policy issues related to the application of the CPMI-IOSCO principles for financial market infrastructures (PFMI) to stablecoin arrangements.
Financial market infrastructures in focus
On the topic of FMIs, the CPMI’s focus is on ‘resilience and recovery’, working with IOSCO’s Financial Stability Engagement Group and the Basel Committee on Banking Supervision (which is also run out of BIS’s headquarters). This is being conducted as part of the broader international work on non-bank financial intermediation, co-ordinated by the FSB.
‘The market turmoil in the early stage of the pandemic underscored the critical role that FMIs play in maintaining resiliency in the financial system. In response to Covid-19, FMIs were able to invoke business continuity plans and working-from-home arrangements at short notice, and have generally been able to continue operations. Yet concerns remain regarding the individual and collective preparedness of FMIs, their participants and other stakeholders, to respond to potential stress events,’ the CPMI notes.
‘Mitigating against current or future risks in FMIs remains a critical part of the Committee’s work programme,’ it continues, adding that ‘a priority remains [the CPMI’s] continued commitment to work items that were in train before the pandemic, including those related to wholesale payments fraud at endpoints, cyber resilience and FX [foreign exchange] settlement risk.’
Climate change-related risks are also mentioned. The CPMI organised a workshop on climate change-related risks to FMIs in August 2020 and states that it ‘will consider possible follow-up work in this area and, as appropriate, collaborate with other standard-setting bodies and the FSB.’
The CPMI is chaired by Bank of England deputy governor Sir Jon Cunliffe while its secretariat is run by Tara Rice, a former deputy assistant secretary for international financial stability and regulation at the US Treasury Department. Rice is a panellist on the topic of ‘Building Back Better: Payment Systems, Supervision and Inclusion in the Digital Age’ at a Toronto Centre virtual event this Thursday (19 August).