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Principles for Financial Market Infrastructures (PFMI)

Financial market infrastructures, including payment and settlement systems, play a critical role in the financial system and in the economy as a whole.  Secure and efficient financial market infrastructures contribute to the maintenance and cultivation of financial stability and economic growth, but are also a source of risk.  If the financial market infrastructures are not properly managed, they may become a source of financial shocks such as liquidity interruptions and credit losses, or a large channel through which such shocks can spread to all financial markets—both domestic and international.  Recognition of the power and scope of the risks inherent in settlement led to Committee on Payment and Settlement Systems (CPSS) and the technical committee of the International Organization of Securities Commissions (IOSCO) over the years to set out international standards for the management of risks to systemically important payment systems, securities deposit systems, securities settlement systems, and central counterparties.

In April 2012, the CPSS and the IOSCO published a report presenting the Principles for Financial Market Infrastructures (PFMI) .The report includes a comprehensive series of 24 fixed principles.  These replaced the dozens of BIS core principles, which were intended to apply to all entities comprising the financial market infrastructure—payment and settlement systems, central securities depositories, securities settlement systems, central counterparties, and trade repositories.

The report also contains five additional areas of central bank responsibility in the market.  As part of these areas of responsibility, the central banks are required to adopt the CPSS-IOSCO principles for financial market infrastructures (PFMI), and to consistently implement them.

In December 2012, the CPSS-IOSCO published a document presenting the disclosure framework for financial market infrastructures and the methodology for assessing the infrastructures’ fulfillment of the standards and the authorities’ fulfillment of their responsibilities (“Disclosure Framework and Assessment Methodology”).  The disclosure framework provides instructions on the form and content of the disclosure requested from the financial market infrastructures.  The assessment methodology provides guidelines for assessors on how to assess the fulfillment of the 24 principles and five areas of responsibility detailed in the PFMI.  The methodology document serves as the basis for assessing how the supervised system fulfills the 24 principles.

On November 20, 2014, with the aim of ensuring the efficiency and stability of the payment systems in Israel, the Bank of Israel announced the adoption of the principles published by the CPSS-IOSCO, as well as their application to the payment systems declared as supervised systems.  This process was carried out in conjunction with the various regulators.  In addition, the Israel Securities Authority decided to apply the new principles to the Stock Exchange Clearinghouse in order to ensure its stability and efficiency, based on its function supervising that clearinghouse pursuant to the Securities Law.  This adoption includes the adoption of the central bank’s areas of responsibility.


This page was last updated on: 19/02/2024