Payment Systems – a Potential Source of Risk. The Need for Oversight and Supervision

Abstract

Since the early 1990s, there has been increased attention on the risk banks incur through their role in the payment system. The primary focus has not been on the individual bank’s risk exposure but on the possibility of problems spreading from one bank to another through the payment system. This type of domino effect is called systemic risk and can at worst threaten financial stability. Central banks oversee the payment system in order to limit this risk. This article explains the concepts oversight and supervision as well as the performance of Norges Bank’s tasks in this area.