The Principles for Financial Market Infrastructures (PFMI)

The Principles for Financial Market Infrastructures (PFMI) serve as the backbone of the global financial system, ensuring that the underpinnings of the financial market are resilient enough to weather financial or operational turbulence. Issued by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) in 2012, the principles are deemed as one of the key standards for robust financial systems. They complement the Basel Core Principles and the Insurance Core Principles, creating a triad of guidelines considered essential to bolster and maintain financial stability worldwide. These principles apply to all systemically important financial market infrastructures (FMIs) such as payment systems, central securities depositories, securities settlements systems, central counterparties, and trade repositories. The principles outlined in the PFMI are organized into nine themes. While most of the principles are applicable to all types of FMI, some are specific to certain types. The PFMI ensures that FMIs are governed by effective regulation, supervision, and oversight by a central bank or other relevant authorities. These authorities are expected to have the powers and resources to regulate, supervise, and oversee FMIs effectively. They are also required to clearly define, disclose and consistently apply regulatory policies. Collaboration, both domestically and internationally, is encouraged in promoting the safety and efficiency of FMIs.

Principles for Financial Market Infrastructures: Resilience and Regulation in Global Financial Systems

In the dynamic landscape of the global financial system, the Principles for Financial Market Infrastructures (PFMI) serve as a crucial anchor, providing resilience to withstand financial and operational turbulence. Issued by international regulatory bodies, the Committee on Payments and Market Infrastructures (CPMI), and the International Organization of Securities Commissions (IOSCO), the PFMI shapes the framework for robust financial systems across the world. Together with the Basel Core Principles and the Insurance Core Principles, this triad of guidelines creates a resilient backbone for worldwide financial stability.

The PFMI, introduced in 2012, applies to all systemically important Financial Market Infrastructures (FMIs), which include a diverse range of institutions such as payment systems, central securities depositories, securities settlements systems, central counterparties, and trade repositories. Organized into nine fundamental themes, these principles encompass a broad spectrum of financial services, while providing targeted guidance for specific types of FMIs. Their objective is to ensure that all FMIs operate under effective regulation, supervision, and oversight by appropriate authorities, such as a central bank or relevant regulatory bodies.

These authoritative bodies are endowed with the necessary powers and resources to supervise and oversee FMIs effectively. They bear the responsibility of defining, disclosing, and consistently applying regulatory policies. In a spirit of shared responsibility and collective resilience, collaboration is fostered at both domestic and international levels, highlighting the interconnectedness of our global financial system.

In the face of potential changes to the PFMI, FMIs may experience a myriad of impacts. These range from modifications in governance structures, increased compliance costs, technological infrastructure adjustments, to potential sanctions for non-compliance. Changes could also be required in risk management practices. To navigate these challenges, FMIs can employ several strategies, such as ongoing monitoring of governance, regular self-assessment against PFMI standards, employee training, strengthening internal control systems, and ensuring system capacities are in line with updated principles.

However, timelines for these adjustments can be as diverse as the changes themselves. While minor adjustments may take a few months, significant system overhauls could span a few years. As we continue to navigate the evolving seas of the global financial landscape, the PFMI serves as a guiding lighthouse, providing a robust, adaptable, and resilient framework for financial stability.

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Principles for Financial Market Infrastructures - Executive Summary

The Principles for financial market infrastructures (PFMI) are the international standards aimed at ensuring that the infrastructure supporting financial markets is robust enough to withstand financial or operational shocks.

Executive SummaryBIS authors