ANNUAL REPORT 2008 - Polymer Bank Notes of the World

institutions. The Federal Reserve Systemaccepts primary oversight responsibility forCLS under a cooperative oversight arrangementinvolving the G10 central banks and the centralbanks of CLS-settled currencies. Within thiscooperative oversight arrangement, the ECB(in close cooperation with the euro area NCBs)has primary oversight responsibility for thesettlement of the euro by CLS.In terms of value, CLS is the largest paymentsystem settling euro transactions outside the euroarea. Accordingly, the safety and efficiency ofCLS and its compliance with the Eurosystempolicy principles 20 is of primary importance tothe Eurosystem. In December 2008 CLS settledan average of 473,000 foreign exchangetransactions per day with an average dailysettlement value equivalent to €3.3 trillion. 21 Thisis a substantial increase in terms of volumecompared with December 2007, when CLSsettled an average daily volume of 381,436transactions with an average daily settlementvalue equivalent to €2.9 trillion. With a share ofaround 21% of all transactions settled in CLS, theeuro has continued to be the second mostimportant currency for settlement, after the USdollar (around 44%). In 2008 the average dailyvalue of CLS transactions settled in euro was€560 billion.In 2008 the BIS published a report entitled“Progress in reducing foreign exchangesettlement risk”. 22 The report, which includescontributions from the Eurosystem, indicatesthat the comprehensive long-term strategyendorsed by the G10 central banks in 1996has significantly reduced the systemic riskarising from the way in which foreign exchangetransactions are settled. However, it alsopoints out that more can and should be doneby individual institutions, industry groups andcentral banks to tackle remaining exposureand to guard against the risk of reversing theprogress that has already been made.SWIFTThe ECB participates with the other G10 centralbanks in the cooperative oversight of SWIFT,with the Nationale Bank van België/BanqueNationale de Belgique being the overseer withprimary responsibility. The G10 cooperativeoversight of SWIFT concentrates on theobjectives of security, operational reliability,business continuity and resilience of the SWIFTinfrastructure. During 2008 the oversightgroup reviewed whether SWIFT was pursuingthese objectives by ensuring the existence ofgovernance arrangements, structures, processes,risk management procedures and controls thatenable it to effectively manage the potentialrisks to the proper functioning of marketinfrastructures using SWIFT and to financialstability in general.In 2008 the SWIFT overseers paid particularattention to SWIFT’s project to move to amulti-zone messaging architecture. SWIFT’sprocessing will be divided into two zones,namely the transatlantic and the Europeanzone, with the aim of increasing the processingcapacity of its infrastructure, enhancing itsresilience and meeting European data protectionrequirements. As part of the project, whichwill be implemented in two phases by 2010and 2013 respectively, a new global operatingcentre will be established in Europe to serveboth the transatlantic and European zones.European-based customers of SWIFT will beautomatically assigned to the European zone,with all their intra-European traffic beingprocessed and stored in Europe. The overseersare reviewing SWIFT’s processes for the designand roll-out of this architecture, while at the sametime monitoring whether due attention is beingpaid to the continued resilience and availabilityof the SWIFT services which are crucial formaintaining global financial stability.20 “The Eurosystem policy principles on the location andoperation of infrastructures settling euro-denominated paymenttransactions”, ECB, July 2007.21 The cash settlement of each foreign exchange trade consists oftwo payment transactions, one in each currency involved. Thus,in December 2008 CLS settled 236,396 trades with an averagedaily value equivalent to around €1.65 trillion.22 http://www.bis.org/publ/cpss83.htmECBAnnual Report2008165