Oversight of financial market infrastructures
The Central Bank of Iceland is required by law to promote financial stability and sound and secure financial activities. The Bank shall also undertake such tasks as are consistent with its role as a central bank, such as promoting a safe, effective financial system, including domestic and cross-border payment intermediation.
Payment- and securities settlement systems are an important element of the financial system; therefore, it is important to guarantee that they function effectively and reliably. The Bank plays a multifaceted role in the field of payment intermediation, and various Bank departments are involved. Within the Financial Stability Department is a separate unit called Oversight of Financial Market Infrastructures.
The Bank focuses primarily on the macroeconomic environment of the financial system and on the system as a whole, including its strengths and weaknesses. The Bank’s oversight activities aim at promoting security, efficiency, and efficacy of core infrastructures in the Icelandic financial system, or systemically important financial market infrastructures, thereby safeguarding financial stability.
The Central Bank’s oversight role vis-à-vis systemically important financial market infrastructures primarily entails the following:
- Monitoring evolution, effectiveness, and operational security of such infrastructures through information gathering and communication with the system administrators.
- Conducting regular appraisals of the security and efficacy of systemically important financial market infrastructures based on internationally recognised guidelines for best practice; i.e. the Core Principles for Financial Market Infrastructures (PFMI) issued by the Bank for International Settlements’ Committee on Payment and Settlement Systems (BIS/CPSS), today called the Committee on Payments and Market Infrastructures (BIS/CPMI) and the Technical Committee of the International Organization of Securities Commissions (IOSCO). The Core Principles shall be applied in a harmonised manner vis-à-vis various systemically important financial market infrastructures and the designation of infrastructure elements as systemically important shall be reviewed on a regular basis.
- Recommending modifications to financial market infrastructures and their framework (including regulatory) if necessary.
What does financial market infrastructures mean?
What does systemically important mean?
Systemically important financial market infrastructures in Iceland
The PFMI Core Principles