Page 57 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Principal risk The risk that the seller of a security delivers a security but does not receive
payment or that the buyer of a security makes payment but does not receive
delivery. In this event, the full principal value of the securities or funds
transferred is at risk. In the settlement process, this term is typically associated
with exchange-for-value transactions when there is a lag between the final
settlement of the various legs of a transaction (i.e., the absence of delivery
versus payment).

Reputational risk The risk of loss of confidence in the payment system due to lack of
management control, capacity, security, business continuity plans, and/or
contingency measures.
Settlement risk General term used to designate the risk that settlement in a transfer system
will not take place as expected. If a party defaults on one or more settlement
obligations to its counterparties or to a settlement agent, this can generate
both credit and liquidity risk.

Systemic disruption Events whose impact has the potential to threaten the stability of the financial
system, by transmission from one financial institution to another, including
through the payment system.
Systemic risk The risk that the failure of one participant in a transfer system, or in
financial markets generally, to meet its required obligations will cause other
participants or financial institutions to be unable to meet their obligations
(including settlement obligations in a transfer system) when due. Such a
failure may cause significant liquidity or credit problems and, as a result, might
threaten the stability of financial markets.

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