Harmonisation of the financial infrastructure
Many actors in the financial system conduct business in several different countries. It is therefore an advantage if the processes for payments and securities transactions are similar, regardless of which country they concern, as one then does not need to make local adjustments to one’s systems and processes. Another way of expressing this is that harmonisation between different countries simplifies cross-border activities. This in turn leads to increased efficiency in the financial system.
Harmonisation reduces the differences between countries
Harmonisation means that one minimises the differences between how things are done in different countries. There are different ways of achieving this, but one way is to agree on some form of standards, which describe in detail how the different processes work. When payments and transactions in financial instruments are made, the information is sent between financial agents. To ensure this exchange of information functions efficiently, it is an advantage if the information is organised in the same way and includes the same type of data. Many initiatives have been taken within the financial system in Europe over the past 10 to 15 years, by both private and public sector bodies, to harmonise the regulatory framework and harmonise processes as well as standardising message formats. Examples of harmonisation through regulation are the European regulations European Market Infrastructure Regulation (EMIR) and Central Securities Depository Regulation (CSDR). These regulations entail similar requirements for financial infrastructure systems in the different European countries.
Harmonisation facilitates cross-border activity
Harmonisation of the Swedish financial infrastructure’s processes and message formats to European standards is an important element for the Swedish financial system to continue functioning safely and efficiently. Harmonisation also facilitates cross-border activity, as one then does things the same way in different countries. This is beneficial for both Swedish and international agents. When the processes are not harmonised, that is, they differ between countries, this means that actors wanting to conduct cross-border activities must adapt their processes and systems to the different countries. This is expensive and required more work. It also entails higher operational risks. Smaller actors may find it difficult to conduct business in several countries, as it becomes too expensive.
The Riksbank’s role in the harmonisation work within financial stability
The Riksbank plays an active role in the harmonisation work that concerns financial infrastructure on the Swedish market. For instance, during 2020, the Riksbank worked together with the Swedish securities market participants and other interested parties in a body called Coordination Forum for Swedish Post-trade Harmonisation. The Coordination Forum had the task of drawing up a plan for harmonising the Swedish securities market’s post-trade processes with European standards. The forum ceased to exist when the harmonisation plan was drawn up. Work on the implementation of the plan is instead followed up in a group called the Swedish National Stakeholder Group (NSG), which was established in June 2021.
In addition, the Riksbank’s coming connection to the European Central Bank’s platform for instant payments, Target Instant Payment Settlement (TIPS), is an important part of the Riksbank’s harmonisation work. In 2020, the Riksbank signed an agreement with the Eurosystem on using the TIPS platform. During 2021, the Executive Board of the Riksbank took a strategic decision to use the Eurosystem’s technical platforms for settlement of payments and securities in Swedish kronor, TARGET2 and TARGET2-Securities (T2S) respectively.
The National Stakeholders Groups provide links between local markets and the Eurosystem
NSGs are the norm for how European countries coordinate and follow up their national work on standards in the securities market post-trading area. All markets using the T2S platform have an NSG, but there are also NSGs in other European markets.
The NSGs form a link between local stakeholders and relevant Eurosystem forums, including the Advisory group on Market Infrastructures for Securities and Collateral (AMI-Seco). This allows market participants to raise issues relevant to the local market.
The Swedish NSG includes stakeholders and actor from the Swedish securities market. The Riksbank provides the chairmanship and secretariat for the group. The main focus of the Swedish NSG in the coming years will be the harmonisation plan. The NSG also entails a higher degree of participation from the Swedish market in the European harmonisation work going forward.