What are systemically important payment systems?
Systemically important payment systems (SIPS) are European large-value payment systems which are considered to be significant for financial stability due to their transaction volume, market share and cross-border relevance. There are currently four SIPS, which are subject to regulation and monitoring by the European Central Bank (ECB).
Where have you heard about systemically important payment systems?
You probably won’t have heard of systemically important payment systems, but they’re the European equivalent of systemically important financial utilities (SIFUs) in the United States. They’re regulated for the same reason: their failure could threaten the stability of the financial system and cause a crisis similar to 2008.
What you need to know about systemically important payment systems.
The European Central Bank (ECB) is responsible for classifying SIPS and reviews the list once a year. There are four relevant factors for the classification of SIPS: financial impact, degree of market penetration, cross-border dimension and settlement for other financial market infrastructures. Currently there are four SIPS: TARGET2, EURO1, STEP2-T and CORE. These are operated by both central banks and private entities in the euro area. The ECB regulation provides oversight of legal, credit, liquidity, operational, general business, custody, investment and other risks. The ultimate aim of the regulation is to provide safe payment systems in the euro area.
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