The Committee on Payment and Settlement Systems (CPSS), one of the standing committees hosted by Swiss-based Bank for International Settlements (BIS, has been renamed as the Committee on Payments and Market Infrastructures (CPMI) to better reflect its actual activities, according to the BIS.
The origins of CPSS date back to the late 1970 when central banks intensified their cooperation in international payment and settlement systems following the June 26, 1974 failure of the small German bank Bankhaus Herstatt.
German regulators liquidated Herstatt but on that same morning banks in Frankfurt released payments in German marks to Herstatt in exchange for U.S. dollars that were scheduled to be delivered later that day in New York. But Herstatt's counter parties in New York never received their funds because of the time-zone difference. Herstatt was closed by regulators before dollar payments could be made during U.S. business hours.
Central bankers then began work on how to avoid this so-called settlement risk in foreign exchange trading and in 1990 CPSS was set up as a permanent body to develop global standards. CPSS helped lead to the introduction of Real Time Gross Settlement Systems (RTGS), which ensure that payments between different banks in different time-zones are executed in real-time and are final.
While the basic role of CPSS did not change over the years, it gradually expanded its field of interest in parallel with the growing complexity and interdependence of financial markets.
After two rounds of enlargement in 1997-98 and 2009, the Committee today includes representatives from 25 central banks and reports to Global Economy Meeting (GEM), one of the main bimonthly meetings of central bank governors that are held at the BIS.
GEM comprises governors from 30 of the world's largest central banks that account for about four-fifths of global growth. In addition to renaming CPSS to CPMI, the GEM's meeting in June also endorsed a new mandate and charter for CPMI.
CPMI's mandate covers payment, settlement and clearing arrangements both within and across jurisdictions, and covers both large-value and retail payments, foreign exchange settlement, securities and derivatives clearing and settlement, multilateral netting or collateral management.
"It is difficult to predict what lies ahead, but it will be essential that the Committee remains alert to any future developments that may affect the safety and efficiency of the global financial market infrastructure," Benoit Coeure, European Central Bank (ECB) board member and chairman of CPMI, said in a statement.
"It would be highly damaging to the global economy if markets were to cease to function effectively because of concerns about the risks of post-trade infrastructure. Hence the importance of regulation and oversight of payments, clearing and settlement arrangements taking the most rigorous approach possible to risk reduction and management."