Page 73 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Box 2. Relevant standards for regional financial infrastructure integration
A prime example of global policy standards that promote and facilitate the strengthening of the
clearing and settlement mechanisms of regional financial infrastructure are the CPSS-IOSCO.

Principles for financial market infrastructures 1
Regarding the legal/regulatory standards covering the bilateral or multilateral relations of participants
in regional financial infrastructures, all trading, clearing, and settlement platforms use a rulebook,
owned by a scheme management organization or by the platform involved. Examples of rulebooks
for payments are the SEPA Credit Transfer Rulebook, the SEPA Direct Debit Rulebook, NACHA
Rulebook, IPF Rulebook, EACHA Framework and CLS Rulebook, and for securities and their clearing
arrangements, the LCHClearnet Rulebooks. In addition to rulebooks, master agreements are also
available, like the ISDA Master Agreement for derivatives transactions. In most regional integration
projects, it is possible to re-use available rulebooks or master agreements.

The choice of technical standards is important to ensure such things as efficient processing between
the infrastructure and its participants, the effective delivery of services to customers (in the case
of end-to-end processing), or uniform reporting to the public authorities. Many vendors already
have technology solutions available based on global standards. For example, product and service
solutions are often coordinated around core standards such as ISO 20022, ISO15022, International
Bank Account Numbers - IBAN (ISO 13636), and International Securities Identification Numbers – ISIN
(ISO 6166). Also, mapping interfaces are available that allow for straight-through-processing between
infrastructures using different messaging solutions. Similar benefits are provided by the interfaces
that map proprietary messaging systems into standardized international formats.

1 See "Principles for financial market infrastructures", joint report of the Committee on Payment and Settlement Sys-
tems and the Technical Committee of the International Organization of Securities Commissions, Bank for International
Settlements, April 2012.

31. Risks may derive precisely from inadequate harmonization and standardization. Lack of adequate
harmonization and standardization may limit the overall benefits of scheme or system interoperability, for
example, by raising the cost for PSPs to operate across schemes or systems. This lack of harmonization and
standardization may also make the linked schemes or systems more prone to contagion. This would be the
case, for instance, if oversight requirements were not sufficiently harmonized across the linked PSIs and if
each PSI were to apply different standards than the others (say, on access criteria or for risk management):
the PSIs that were subject to more stringent requirements would become exposed to those operating under
weaker requirements. In this regard, risks may arise from the decision of PSI owners to follow a minimum-
resistance path to interoperability agreements, deliberately lowering the degree of required harmonization
and standardization accordingly.

Implications for Oversight Policy

A. The cross-border dimension of payment system oversight

32. The role of central bank oversight of payment systems in the context of interoperability has been
discussed in the companion report on "Payment System Oversight and Interoperability". The focus of this
section is on the implications for oversight policy of the cross-border dimension introduced by international
interoperability, and the specific challenges and risks relating to it. In particular, although the principles
elaborated in the companion report remain valid in the context of international interoperability, the preceding

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