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Financial market infrastructures contract out some of their operations to third-party service providers who are critical to the functioning of these systems. This is, for example, the case for SWIFT, which provides messaging services and interface software to the financial industry worldwide. A failure of critical IT infrastructure or telecommunication services could lead to disruptions in the financial market infrastructure. The Eurosystem has therefore a keen interest in the smooth functioning of these third-party service providers.
For the Eurosystem, it is a key principle that the individual systems retain full responsibility for any activity that is material to the relevant system’s operation. This also includes responsibility for ensuring that the service provider complies with the applicable oversight policies.
When a service provider supplies critical services to one or several key systems, direct oversight activities will be undertaken.
S.W.I.F.T. SCRL, the Society for Worldwide Interbank Financial Telecommunication ( SWIFT), is a limited liability cooperative company incorporated in Belgium and owned by its members.
SWIFT is the messaging service provider for most of the systemically important payment and securities clearing systems. As participants in these systems, the Group of Ten (G10) central banks, including the ECB, perform cooperative oversight of SWIFT. Given that SWIFT is incorporated in Belgium, the Nationale Bank van België/Banque Nationale de Belgique acts as lead overseer.
The oversight focuses on the security, operational reliability, business continuity and resilience of the SWIFT infrastructure. The cooperative central bank activity aims to ensure that SWIFT has appropriate governance arrangements, risk management procedures and controls in place. Effective structures and processes are necessary to manage the risks for financial stability and the soundness of financial infrastructures.
The oversight standards which currently exist have been drafted for payment, settlement and clearing systems. These standards do not as such apply to SWIFT, although this institution is a major messaging service provider for many financial market infrastructures and financial institutions. To fill this gap, the overseers have developed specific oversight standards that are applicable to SWIFT known as the "High level expectations for the oversight of SWIFT" (HLEs).
The HLEs were published in the Financial Stability Review 2007 on the National Bank of Belgium's (NBB) website:
TARGET2-Securities (T2S) is a shared, single, technical platform. It will enable central securities depositories (CSDs) and central banks to provide core, borderless and neutral securities settlement services in central bank money in Europe. The platform, which was launched by the Eurosystem as part of its statutory tasks, will be established by 2014.
Competent authorities will oversee the sound and efficient functioning of T2S. These authorities comprise
Currently, a cooperative framework for oversight and supervision of T2S services that aims to coordinate the information flow among competent authorities is being discussed. The framework aims to support the competent authorities and prevent unnecessary regulatory burdens.
