Farewell remarks as CPMI chair

Remarks delivered at the dinner of the Committee on Payments and Market Infrastructures by Benoît Cœuré, CPMI Chair and Member of the Executive Board of the European Central Bank, Buenos Aires, 2 October 2019

Dear members of the CPMI, members of the CPMI Secretariat and colleagues of the Central Bank of Argentina

It has been an incredible honour and a matter of pride for me to serve this Committee for the last six years, standing on the shoulders of such central bank giants as Wayne Angell, Bill McDonough, Wendelin Hartmann and Tommaso Padoa-Schioppa, and my more immediate predecessors, Tim Geithner, Bill Dudley and Paul Tucker. But the person whose name I would like to place at the very top of the list is Alexandre Lamfalussy, whose November 1990 report  framed the work of the (then) Committee on Payment and Settlement Systems (CPSS) and qualifies him as our Committee's true founding father. I look forward very much to the 30th anniversary of the CPMI next year.

I would like to organise my remarks this evening around the four words that make up the CPMI's name: "committee", "payments", "markets" and "infrastructures".

"C" for "Committee"

Committees are not like Tolstoy's families: happy committees are all different. I have been in many of them and been able to see them working in different ways and with their own alchemies. Some committees produce ideas, some produce process. Ideas are needed because you want to start off from the right place - that is, from first principles. Process is needed because you want to end up in the right place - that is, with solutions that work in the real world. The CPMI is a happy committee, and it displays a rare blend of both of the qualities I have just mentioned. It thrives on the analytical input of its members: over these six years, I have learnt a lot from you, and we've achieved a lot together. We have published an impressive number of reports , we have shaped and influenced policy discussions in the Financial Stability Board, Group of Seven and Group of Twenty, and our work has become a source of reference and inspiration for many. None of this would have been possible without the unwavering commitment and hard work of the CPMI Secretariat, and I would like in particular to thank CPMI Heads of Secretariat Klaus Löber and Morten Bech for their leadership, and the Bank for International Settlements for its support.

The CPMI has evolved over the last few years, with a new name, a broader and globally more representative membership, a more formal yet still lean governance, enhanced public transparency and formal interaction with other standard-setting bodies. My wish is that you can stay lean and nimble to address tomorrow's challenges, and interact flexibly with other stakeholders, including in developing economies where payments have been leapfrogging forward in spectacular ways and from which we can learn so much. Judging by the current wind of change, the CPMI's crop is yet to fully ripen.

"P" for "Payments"

Payments are at the heart of central banks' mandates. But they are not always "sexy" and hip. Central banks should be boring, as Sir Mervyn King once famously said. Payments are no different. When we drive back home from our offices through the dark, it is our pride that infrastructures that are critical for our financial systems and economies have worked reliably and seamlessly for another day, even if - or especially if - no one ever notices. But sometimes payments are disruptive. They proceed in historical waves, driven by technical innovation, which see them move back and forth, from the back to centre stage of central bank policy. The last great wave of payment innovation was the advent of real-time gross settlement (RTGS) systems in the late 1990s. Today we find ourselves in the midst of another such wave, which extends deep into retail payments and is driven by fintech and digitisation.

I often think of central bankers as having two bodies, the inner thinker (or even "magician", some would say) doing monetary policy and the inner plumber taking care of payments and market infrastructures. And one should take pride in being both. As an economist, I always keep in mind John Maynard Keynes' remark that "if economists could manage to get thought of as humble competent people, on a level with dentists, that would be splendid".

That said, during my CPMI tenure, I have come to understand that payments and monetary policy are intertwined in more ways than we think. We know from history that early central banks morphed out of commercial undertakings such as the Bank of Amsterdam, which provided giro accounts to merchants in the early 17th century - an innovation in payments. The most important monetary innovation of the last century, the euro, critically relies on TARGET2 to flow seamlessly across a continent, an infrastructure itself made possible by RTGS innovation. And our current discussions on blockchains, digital tokens and stablecoins may accelerate the advent of central bank digital currency, and thereby revolutionise the nature and transmission of monetary policy in ways that seemed unthinkable just a few years ago. The CPMI is part and parcel of the broader reflection on the future of payments, and hence of monetary policy.

"M" for "Markets"

Payment systems can be public or privately owned and operated. Market infrastructures can also be public or private. Money itself can be central bank-issued or commercial. Modern financial systems assemble elements of each - as much private as possible to reap the innovation potential of competition, and as much public as needed to ensure stability and trust. So it is essential that this Committee engages with market participants as it has done in so many instances, alone or together with IOSCO - on our beloved Principles for Financial Market Infrastructures (PFMI), on central counterparty (CCP) resilience and recovery, on the cyber guidance and strategy on fraud in endpoint payments, and on many other issues. It is also essential that we engage with diverse groups of stakeholders, in particular when it comes to retail payments and financial inclusion. We are not here to serve ourselves, nor to serve the financial industry, but to serve the public at large. Understanding markets and engaging with diverse stakeholders is and will remain part of our DNA.

"I" for "Infrastructures"

Payment systems and financial market infrastructures (FMI), being the backbones of our financial systems, are systemic by nature. We should never lose sight of the systemic dimension of what we do. We have greatly improved our understanding of how financial shocks propagate through FMIs, in particular thanks to the CCP work plan and to the related analytical work on interdependencies. Supervisory stress testing of CCPs has a systemic dimension. To be fair, we are less advanced in other areas, such as understanding and mitigating the procyclicality of our prudential requirements. Finishing our work on data harmonisation and aggregation will also help harvest relevant data and progress our understanding.

Regulating financial infrastructures requires a regulatory infrastructure, as reflected by the existence of the PFMI, and their requirement of cooperative oversight. The CPMI is a key pillar of the international regulatory architecture. True, our standards are not legally binding. What we do may be seen as weak or soft cooperation. But at a time where global political cooperation is broken, and some international organisations are under attack, it is more important than ever to protect our cooperation. Tommaso Padoa-Schioppa once said that international cooperation among central banks can be compared to Italo Calvino's "Nonexistent Knight". I now quote from Tommaso:

When Charlemagne, reviewing his paladins before the battle against the Infidels, reached the last knight, Agilulf, clad entirely in white armour, the cavalier refused to show his face to the emperor. The explanation he gave was simple: "Sire, because I do not exist." Charlemagne insisted, and when the knight finally raised his visor, the helmet was empty. "Well, well! Who'd have thought it!" exclaimed Charlemagne. "And how do you do your job, then, if you don't exist?" "By will power and faith in our holy cause!" said Agilulf. He fought with valour and bravery. His special status assisted him in the accomplishment of his duty, and indeed he proved to be one of the best paladins.

It is my wish that the CPMI continues to fight for a stable and efficient global financial system for many years to come, sometimes unseen but with the same valour and bravery.

Thank you for your attention.