Front Matter

Front Matter

Bruce Summers
Published Date:
December 1994
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    The Payment System

    Design, Management, and Supervision

    Edited by

    Bruce J. Summers

    International Monetary Fund

    Washington, D.C.


    © 1994 International Monetary Fund

    Library of Congress Cataloging-in-Publication Data

    The Payment system : design, management, and supervision / edited by Bruce J. Summers.

      • p. cm.

    • ISBN 1-55775-386-5

    • 1. International clearing. 2. Electronic funds transfers—International cooperation. 3. Clearinghouses (Banking) I. Summers, Bruce J. II. International Monetary Fund.

    HG3892.P39 1994




    Reprinted April 1998

    Price: US$22.50

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    The International Monetary Fund has been providing technical assistance in central banking for many years. Recently, the massive structural changes that have been occurring in many economies in transition have greatly increased the demand for technical assistance in all areas, including central banking. In response to this challenge, and at the request of major central banks, the IMF has provided and coordinated central banking technical assistance to the states of the former Soviet Union and the Baltic States with the support of a number of cooperating central banks and other international organizations. This book on payment systems is a product of this joint endeavor.

    Improvements in the payment system have been a top priority among central banking reforms for those countries moving away from centrally planned economies. Because in the previous regimes the payment system played a very different role from that played in market economies, transforming the old system to an efficient, reliable, and safe one was essential. This transformation has been crucial both to facilitate monetary management through market-oriented monetary instruments and to provide an efficient payment service to the financial system and the real sector. The importance of payment system reforms for monetary management and financial market development has motivated the IMF to work closely with cooperating central banks to provide technical assistance on payment systems and to coordinate these efforts with other international institutions. Such cooperation and coordination has been important because of the magnitude of the structural changes needed; the importance of consistency in changes within the payment system and with other central banking reforms; and the interdisciplinary nature of payment system reforms involving accounting, technology, monetary policy, and regulatory policy.

    This book illustrates the support and cooperation that the IMF has received from cooperating central banks and other international organizations in assisting the countries in transition. The IMF is pleased to publish this book. It should bring to a broader range of practitioners a valuable presentation of the conceptual framework for payments and the analytic review of many practical issues of concern to transition economies, drawing on international experience.

    Michel Camdessus

    Managing Director

    International Monetary Fund


    The payment system is an essential part of the financial infrastructure in a market economy, where the organization and operation of the monetary, banking, and payment systems are determined largely by the needs of the markets, with official oversight to ensure stability and safety. Development of the financial infrastructure, including reform of the payment system, is a top priority in formerly socialist economies making the transition to the market system, including the economies of the countries emerging from the breakup of the former Soviet Union.

    Over the past few years, the Group of Ten and other central banks have been providing technical assistance to the nascent central banks of the states of the former Soviet Union to assist them in reforming their financial systems, with a major emphasis on developing well-functioning payment systems. A significant part of this assistance has been organized under the aegis of the International Monetary Fund in cooperation with other international organizations. A major element of the technical assistance has been training, including operational exposure to the principles and practice of commercial and central banking in a market system.

    In September 1992, the Federal Reserve jointly sponsored with the International Monetary Fund, the Organization for Economic Cooperation and Development, the Bank for International Settlements, and other central banks a two-week training program on the payment system for central bankers from the states of the former Soviet Union. The training program was organized by Bruce J. Summers, editor of this volume, who was then serving as Deputy Director of the Federal Reserve Board’s Division of Reserve Bank Operations and Payment Systems.

    The training program provided both the conceptual foundation for understanding payment systems in developed market economies and practical, hands-on exposure to payment system operations. Central bankers from around the world, with many years of diversified experience in payment system issues, conducted a series of seminars on payment system concepts and practices. These seminars were hosted by the Bank for International Settlements and the Federal Reserve System. Participants in the seminars visited central and commercial bank payment system operations in Zurich, Frankfurt, and New York.

    This book is based on the lectures prepared for the training program. It is being published in English and Russian to broaden its accessibility. A complete range of topics is treated in a highly integrated and analytical fashion, and special emphasis is given to the design and operation of large-value payment systems. The result is a valuable and distinctive analytical contribution to the literature that will be of interest to students of the payment system in both developed and emerging market economies. It is hoped that this volume will make a practical contribution to the design and management of payment systems, increase understanding of the relationship between the operation of the payment system and monetary policy, and further develop an appreciation for appropriate supervisory arrangements to ensure payment system stability and safety.

    Alan Greenspan

    Chairman, Board of Governors

    Federal Reserve System of the United States


    This book was inspired by the personal experiences of the contributors in providing technical assistance on the payment system to the central banks of the countries emerging from the former Soviet Union. This technical assistance has been truly international, carried out by central bankers from around the world and coordinated by the International Monetary Fund. The book is an extension of this cooperation and is made possible by the collective endeavors of the contributors. Their efforts as teachers made the September 1992 training program possible, and their subsequent conversion of their lectures into articles made this book possible. I am grateful to all of them for finding time in their busy schedules to help make the book a reality. The views expressed by the authors are their own and should not be attributed to the institutions with which they are affiliated.

    The September 1992 training program was a formidable undertaking requiring a great deal of advance preparation. V. Sundararajan, Deputy Director of the Monetary and Exchange Affairs Department of the International Monetary Fund, supported the original idea for the training program and encouraged the initiative. The Organization for Economic Cooperation and Development generously provided funding for the travel expenses of the central bankers from the former Soviet Union for whom the training program was organized. My colleagues at the Federal Reserve Board, especially Edwin M. Truman and Charles J. Siegman, Director and Senior Associate Director, respectively, of the Division of International Finance, were very generous and helpful in providing guidance and insight with respect to the planning for and organization of the training program. Further, Clyde H. Farnsworth, Jr., Director of the Board’s Division of Reserve Bank Operations and Payment Systems, was most generous in accommodating the adjustments to my schedule and responsibilities necessitated by the demands of putting the program together. Jeffrey C. Marquardt and Nalini T. Rogers, my colleagues in the Division of Reserve Bank Operations and Payment Systems, worked closely with me in designing the training program and executing the many details necessary to make it a success. Their cheerful and dependable support was indispensable.

    Special acknowledgment is due to Hans J. Blommestein of the Organization for Economic Cooperation and Development, who originally suggested that the lectures be turned into a book. Elin Knotter of the External Relations Department of the International Monetary Fund edited the book for publication and directed it through production, which was ably carried out by the IMF Graphics Section.

    Bruce J. Summers

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