Business Continuity and Market Infrastructures
What is "business continuity"?
"Business continuity" is defined as a state of uninterrupted business operations. The term refers to the need to ensure the continuity of business activities under any circumstances, especially in times when extraordinary events cause major technical and other problems which threaten to interrupt and/or suddenly interrupt the conduct of business. Business continuity also refers to all of the organisational, technical and staffing measures employed in order to ensure the continuation of core business activities in the immediate aftermath of an operational crisis and, gradually, of all business activities.
Why is it important for market infrastructures?
Several major incidents at an international level over the last few years (e.g. natural disasters, terrorist attacks) have highlighted the importance of the operational reliability of market infrastructures such as payment and securities settlement systems for the stability of the financial markets.
The development of effective business continuity processes is essential to the containment of the operational risk for market infrastructures. Operational risk consists in the risk of their disruption as a result of deficiencies in information systems or internal control systems, operational weaknesses, human error or external events. Furthermore, business continuity contributes to the containment of systemic risk, i.e. the risk the disruption of the smooth functioning of a market infrastructure to transmit shocks across the financial system domestically or even internationally.
The role of the European System of Central Banks (ESCB) and the Eurosystem
One of the basic statutory tasks of the ESCB is to promote the smooth operation of payment systems. In the context of its competence for payment systems oversight, the Eurosystem has established a set of principles for business continuity ("Business continuity oversight expectations for systemically important payment systems (SIPS)", European Central Bank, June 2006) to be implemented by euro systemically important payment systems by June 2009.
These principles constitute a further specification of Core Principle VII on security and operational reliability, included in the "Core Principles for Systemically Important Payment Systems" (Bank for International Settlements, January 2001), which were adopted by the Eurosystem as the common standards for the oversight of euro payment systems in January 2001. According to Core Principle VII, "the system should ensure a high degree of security and operational reliability and should have contingency arrangements for the timely completion of daily processing".
In addition to the establishment of standards, the ESCB also organises business continuity exercises. It is foreseen that market infrastructures and other market participants across national borders will gradually participate in these exercises.
The Bank of Greece, as member of the Eurosystem, is required to ensure the smooth execution of cross-border and domestic payments, as well as the settlement of securities transactions, thus preserving the uninterrupted implementation of the single monetary policy and the smooth functioning of the European System of Central Banks. In this context, the Bank of Greece, by means of the Monetary Policy Council Act 50/31.7.2002, has adopted and applies the above mentioned Core Principles in the conduct of payment systems oversight.