Canada: BIS Committee On Payments And Market Infrastructures Publishes Work Programme For 2021-2022

In early August 2021, the Committee on Payments and Market Infrastructures (CPMI) publicly released its work programme for the first time as part of its commitment to increase transparency. The CPMI is a committee of the Bank for International Settlements (BIS)¹ which sets international standards about the safety and efficiency of payment, clearing, settlement and related arrangements. The CPMI maintains an annual work programme which outlines its strategic priorities and activities. The Committee's 2021-22 work programme focuses on shaping the future of payments and addressing risks in financial market infrastructures (FMIs).

Shaping the Future of Payments

Enhance cross-border payments

Cross-border payments are vital for global trade, yet the CPMI notes that they continue to be slow, expensive, opaque and not inclusive when compared to domestic payments. Accordingly, the CPMI will continue to maintain a high priority on its work on cross-border payments.

In particular, the CPMI will work with the Financial Stability Board (FSB) and other stakeholders on a roadmap which has been developed to enhance cross-border payments and will provide expertise and thought leadership to the roadmap's comprehensive work programme, which runs through to 2025. The CPMI will also continue to monitor de-risking in correspondent banking in cooperation with the FSB and based on data provided by SWIFT.²

Analyze and address policy issues arising from innovations in payments and monitor changing trends in payments

The last few years have seen a rapid pace in innovations in payments in both the private and public sectors. The CPMI notes that the pandemic has led to an even greater interest in digital payment methods, in particular central bank digital currencies (CBDCs) and stablecoin arrangements.

Accordingly, the CPMI is focused on analyzing the future of payments, covering issues such as multilateral payment platforms, stablecoin arrangements and an international dimension of CBDCs. The committee's initial focus will be on how these innovations can benefit cross-border payments.

The CPMI will also work with the International Organization of Securities Commissions (IOSCO) to further analyze how the Principles for Financial Market Infrastructures (PFMI) can apply to stablecoin arrangements. The PMFI are key international standards for FMIs developed by the CPMI and IOSCO and are considered essential to strengthening and preserving financial stability.

The CPMI also notes that the pandemic has led to changes in retail payments behavior which could result in a sharp rise in digital payments and a decline in the use of cash. The CPMI will continue to monitor this changing behavior, collect and publish statistics on payments and FMIs and share new developments in member jurisdictions.

Evaluate and Address Risks in FMIs

Address and advance on issues relevant to the resilience of FMIs

The CPMI emphasizes the critical role that FMIs played in maintaining resiliency in the financial system during the market turmoil in the early stages of the pandemic. FMIs implemented successful business continuity plans and work from home arrangements, allowing operations to continue. But the CPMI remains focused on mitigating against current or future FMI risk during potential stress events. In particular, the CPMI will focus on items such as FX settlement risk³, operational resilience of FMIs and other stakeholders, cyber resilience⁴ and climate change-related risks relevant to FMIs.

Analyse issues related to central clearing

The CPMI also highlights the importance of central clearing and central counterparties (CCPs) and the benefits they bring to global financial stability. But the committee notes that the pandemic and the reaction of the financial system have raised new issues as well as accentuated existing ones.

Specifically, the CPMI will work with international bodies such as IOSCO, the FSB and the Basel Committee on Banking Supervision to examine margin practices during the early days of the pandemic, analyze CCP resilience and recovery, and consider whether there is a need for an international policy on the use of financial resources in the recovery of CCPs in default and non-default loss scenarios.

Footnotes

1 The Bank for International Settlements (BIS) is an international financial institution which supports central banks worldwide in their pursuit of monetary and financial stability, through international cooperation.

2 Most cross-border payments flow through a "correspondent banking network" - a network which the CPMI notes is reportedly shrinking and becoming more concentrated.

3 In December 2020, the CPMI and the Basel Committee on Banking Supervision (BCBS) issued a joint letter encouraging bank supervisors and banks engaged materially in FX trading to meet the expectations set out in the 2013 BCBS Supervisory Guidance on managing FX settlement risk and the Global FX Code. The CPMI will continue to encourage the adoption of these guidance pieces.

4 In June 2016, the CPMI and IOSCO published guidance on cyber resilience for FMIs. The CPMI will continue to work with IOSCO to foster broad implementation of this guidance along with the cyber risk aspects of the PFMI.

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