Board Member Tuomas Välimäki
17th Payment and Settlement System Simulator Seminar
Helsinki, 29 August 2019
OPENING REMARKS AT THE 17TH PAYMENT AND SETTLEMENT SYSTEM SIMULATOR SEMINAR, HELSINKI, 29 AUGUST 2019
It’s my pleasure to welcome you all to the 2019 Bank of Finland payment system simulator seminar. I was delighted to learn that some of you have participated these seminars already for more than a decade. Actually, this is the 17th seminar we organize around our simulator. So, the next time you come here our baby has reached its adulthood.
Now, let me briefly describe what’s new with us, since last year’s seminar, when it comes to the payment systems area. Previously, oversight, together with the BoF- simulator, was one of the functions in our financial stability and statistics department. Policy work related to payment systems was divided between Banking Operations and Financial Stability, and Cash Management was being taken care of together with security and premises.
After the changes in our EB last summer, we decided to reassess the division of labor between different business areas. We came to the conclusion that having different parts of the payment processes scattered around the bank is not likely to be the most efficient way to organize ourselves. Therefore we decided to create a new Payment Systems Department to take a more comprehensive and holistic perspective on the issues at hand. [Data management was, by the way, another area where we reached similar conclusions.]
So, starting from January we have had a new department, Payment Systems, which includes oversight, as well as policy preparations related to all our payment systems and to the process of paying more widely. Also cash is included in the new department as one of our payment systems.
Now what are the latest news with the simulator? Since last year’s conference, the development of the BoF-simulator has been concentrating on renewing of the user interface that was deemed to be outdated. Actually, the old interface was already almost 20 years old, and it was written in Java. We agreed that, an up-to-date interface should support cloud computing and be compatible with the docker-container solutions.
So, our simulator’s new interface is going to be a standalone web-based application. We are hoping to go-alive with it in the coming year. Simultaneously, we’ll continue supporting agent based modelling built in the current simulator version. Here, our experts are integrating and productizing the preliminary work conducted by Matti Hellqvist and Argyris Kahros.
This year the seminar presentations contain various types of quantitative analysis on financial market infrastructures. The life cycles of large value payment systems seem to be approaching their end in many countries, hence, we are beginning to see the next generation being developed. This has been the case at least in Canada and UK. Also, our TARGET2 system is currently being redesigned and rebuilt.
We, the central bankers, often need to take a systemic perspective to the payment systems. This increases our urge for quantitative analysis and systemic simulations. Whereas a single participating institution normally worries about risks related to themselves and to their direct counterparties, central bankers with oversight responsibilities must understand the full picture – who are the critical participants in the system, and how the overall liquidity position is evolving.
Hence, there is an obvious need for quantitative analysis to support the design and development of new payment systems. With simulations we should be able to facilitate the development of next generation of payment systems. Indeed, I do believe that, with reasonable investments in simulation capacity one may be able to save both time and money.
The range of the quantitative analysis in these seminars seems to be getting broader from one year to another. Beside the payment systems, also CCPs, securities and derivatives are now being analyzed more intensively. Techniques like network analysis, neural networks, machine learning and big data are applied also to FMI-data.
Now, with this kind of a palette, no-one can master all the techniques. So, it’s good that we are have nearly 60 seminar participants belonging to 18 different nationalities and coming from four different continents.
Finally, the relationship between this seminar and the BoF-simulator is like love and marriage – there would not be one without the other. I hope that this year the seminar will again be a forum where new ideas are shared by colleagues, and where the newcomers can get inspiration for their future analysis.
Thank you and enjoy the seminar!