Proposal for a Directive on systemic risk in payment systems

Abstract

The past decade, with its unprecedented surge in financial activity and the occurence of financial crises, has been one of increased awareness on the part of both regulatory authorities and market participants of payment system's potential for propagating and amplifying financial shocks, especially in a cross‐border context. This has led the European Commission to propose a Directive aiming at reducing systemic risk in payment systems. Systemic risk is the risk that the illiquidity or failure of one participant in a payment system, and its resulting inability to meet its obligations when due, will lead to the illiquidity or failure of other participants in that system, with, at worst, knock‐on effects in the financial markets at large. This paper draws the background and describes the contents of the Commission's proposal to reduce systemic risk.

Citation

Vereecken, M. (1997), "Proposal for a Directive on systemic risk in payment systems", Journal of Financial Regulation and Compliance, Vol. 5 No. 1, pp. 29-36. https://doi.org/10.1108/eb024902