Oversight of payments infrastructure

Danmarks Nationalbank oversees the safety and efficiency of the most important payment solutions and the systemically important payment and settlement systems. Among other things, this means, that Danmarks Nationalbank prepares assessments of the systems and solutions in accordance with international standards. The oversight results are described in the annual oversight reports.


Oversight is the work performed by Danmarks Nationalbank to contribute to safe payments and the stability of the Danish financial system. Danmarks Nationalbank oversees the most important payment instruments and the Danish payment and settlement systems. The most important payment instruments include, for example, Dankort and Betalingsservice. The payment and settlement systems ensure proper handling of all payments, securities transactions and foreign exchange transactions.

Danmarks Nationalbank oversees that the systems and solutions are safe and efficient and live up to international standards. In addition, Danmarks Nationalbank participates in the cooperative oversight of several international systems.

Danmarks Nationalbank oversees the following systems and solutions:

  • Kronos2: Danmarks Nationalbank’s system for large, time-critical payments, also known as an RTGS system (real time gross settlement)

  • The Sumclearing, the Intradagclearing and the Straksclearing: The financial sector’s systems for clearing and settlement of retail payments.

  • ES-CPH settlement: The Danish system for settlement of securities transactions

  • The payment instruments: Dankort, Betalingsservice (direct debit) and credit transfers

  • CLS: An international system for settlement of foreign exchange transactions

  • TARGET2: The trans-European system for settlement of large, time-critical payments in euro

  • TARGET2-Securities, T2S: The trans-European system for settlement of securities transactions in euro and in Danish kroner

You can read more about how Danmarks Nationalbank oversees the systems below.

Danmarks Nationalbank’s oversight policy

Danmarks Nationalbank’s oversight is based on international standards that set requirements for safety and efficiency. This means that operational stability must be high, risks must be limited, and systems/solutions must be up-to-date and cost-effective.

Danmarks Nationalbank’s oversight of the Danish payment and settlement systems is based on CPMI-IOSCO’s principles for financial market infrastructures (PFMI). CPMI-IOSCO is an international forum for collaboration between central banks and securities authorities. The principles are complemented by various detailed guidelines in specific areas, for example, cyber security.

Danmarks Nationalbank’s oversight of the core payment instruments takes place in accordance with the European Central Bank’s (ECB) oversight framework for electronic payment instruments, schemes and arrangements (PISA).

Danmarks Nationalbank assesses whether the systems and payment instruments subject to oversight comply withthe requirements of international standards. Furthermore, developments in systems and instruments are monitored on an ongoing basis by collecting information  and through dialogue with those responsible. Danmarks Nationalbank recommends changes to the systems and instruments if deemed necessary.

Danmarks Nationalbank’s oversight is directed at the design and functioning of the payment instruments and systems, and how they function in the overall infrastructure. Danmarks Nationalbank does not oversee the individual companies in the infrastructure.

Danmarks Nationalbank describes the activities in relation to current oversight in the annual report ‘Oversight of the financial infrastructure’.

Collaboration with the Danish Financial Supervisory Authority

Danmarks Nationalbank collaborates with the Danish Financial Supervisory Authority regarding areas where their powers overlap. This collaboration is particularly close when it comes to operational risk, including cyber risk. Among other things, the Danish Financial Supervisory Authority performs IT supervision and ensures compliance with statutory requirements , for instance in relation to IT security management, outsourcing and auditing.

Danmarks Nationalbank’s assessment of whether a system or a payment instrument meets the requirements of international standards regarding IT security and operational risk management is based, as far as possible, on the Danish Financial Supervisory Authority’s observations and conclusions.

Danmarks Nationalbank oversees the systems and solutions in the following manners

Kronos2 is Danmarks Nationalbank’s system for large, time-critical payments in Danish kroner.

Kronos2 is used, among other things, for the settlement of monetary-policy transactions, interbank payments and settlement of payments in other systems in the payments infrastructure, including the Sumclearing, the Intradagclearing, the Straksclearing, ES-CPH settlement and CLS.

Kronos2 is the core of the Danish payments infrastructure. That is why it is important for Kronos2 to work safely and efficiently. 

Danmarks Nationalbank’s oversight of the Kronos2 payment system is based on the international standards for safe and efficient financial market infrastructures, Principles for Financial Market Infrastructures, and exercised in accordance with Danmarks Nationalbank’s policy for oversight of the financial infrastructure in Denmark. Danmarks Nationalbank’s most recent assessment of Kronos2 is from 2021. 

 

Read more

Read the most recent assessment of Kronos2 published in December 2021.

The Sumclearing, the Intradagclearing and the Straksclearing (i.e. the express clearing) are the financial sector’s systems for clearing and settlement of retail payments in Danish kroner.

Oversight of the Sumclearing, the Intradagclearing and the Straksclearing is based on the international standards for safe and efficient financial market infrastructures, Principles for Financial Market Infrastructures, and takes place in accordance with Danmarks Nationalbank’s policy for oversight of the financial infrastructure in Denmark.

An important element in the oversight process of the retail payment systems is to assess whether they comply with international standards/principles for safe and efficient financial market infrastructures.

 

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Danmarks Nationalbank’s most recent assessment of the systems according to the Principles for Financial Market Infrastructures was published in May 2018.

In 2022, Danmarks Nationalbank completed an assessment of the Danish retail payment systems’ compliance with CPMI-IOSCO’s cyber guidance. The assessment is not publicly available.

Euronext Securities Copenhagen (ES-CPH) handles the settlement of Danish securities transactions. In Denmark, the professional participants’ mutual securities transactions are settled in the European securities settlement system, T2S, while private investors’ transactions are settled through ES-CPH’s own settlement system. For both settlement systems, participants must have a custody account at ES-CPH in order to use the systems. In a securities transaction, securities are exchanged in custody accounts at ES-CPH, while the payment is executed via the participants’ Kronos2 accounts.

ES-CPH forms part of the pan-European stock exchange and market infrastructure group Euronext Group. Euronext has companies in several European countries, including central securities depositories in Norway, Portugal and Denmark. Euronext Securities Copenhagen is the central securities depository for all Danish listed securities as well as certain other securities.

Danmarks Nationalbank’s oversight of the settlement of securities transactions is based on the international standards for safe and efficient financial market infrastructures, Principles for Financial Market Infrastructures, and in accordance with Danmarks Nationalbank’s policy for oversight of the financial infrastructure in Denmark.

The oversight of securities transactions is primarily aimed at Euronext Securities Copenhagen’s activities relating to the clearing, settlement and registration of securities. Danmarks Nationalbank also participates in the ECB’s oversight of T2S.

 

Read more

Read Danmarks Nationalbank’s most recent assessment of VP Securities from February 2016 before Euronext Securities acquired VP Securities.

In 2020, Danmarks Nationalbank completed an assessment of ES-CPH’s compliance with the CPMI-IOSCO’s cyber guidance. The assessment is not publicly available.

Danmarks Nationalbank oversees the most important payment instruments in Denmark. At present, these are assessed to be Dankort, Betalingsservice (direct debit) and credit transfers. The oversight of Dankort and Betalingsservice is based on the ECB’s oversight standards for payment instruments and takes place in accordance with Danmarks Nationalbank’s policy for oversight of the financial infrastructure in Denmark. Credit transfers are overseen as part of Danmarks Nationalbank’s retail payment system oversight.

 

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The ECB’s oversight standards for payment solutions are available on the ECB’s website: The Eurosystem oversight framework for electronic payments (PISA).

Danmarks Nationalbank contributes to other central banks’ oversight of international payment and settlement systems that are part of the Danish infrastructure.

Danmarks Nationalbank participates in the cooperative oversight of the international currency settlement system, CLS, as well as the Eurosystem’s TARGET2 and TARGET2-Securities, T2S, which are used for settlement of payments in euro and securities transactions in euro and Danish kroner, respectively.

The oversight of CLS, TARGET2 and T2S is based on the international standards for safe and efficient financial market infrastructures, Principles for Financial Market Infrastructures, and in accordance with Danmarks Nationalbank’s policy for oversight of the financial infrastructure in Denmark.

 

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You can find the ‘Protocol for the Cooperative Oversight Arrangement of CLS’ on the Federal Reserve System's (Fed) websiteSupervision & Oversight of Financial Market Infrastructures.

Foreign exchange transactions are settled in CLS, an international system for settlement of transactions in 18 connected currencies. Most foreign exchange transactions in Danish kroner are settled in CLS.

The Federal Reserve System is the main oversight authority of CLS. The central banks of the connected currencies, including Danmarks Nationalbank, participate in the cooperative oversight of CLS and in the CLS Oversight Committee. The cooperative oversight arrangement is formalised in the Protocol for the Cooperative Oversight Arrangement of CLS. Danmarks Nationalbank’s oversight focuses on matters of importance to the settlement of transactions in Danish kroner.

TARGET2 is the European system for large, time-critical payments in euro. TARGET2-Securities (T2S) is the European system for settlement of securities transactions in euro and in Danish kroner.

The European Central Bank (ECB) is the main overseer of TARGET2 and T2S. Danmarks Nationalbank participates in the cooperative oversight of the systems. As regards TARGET2, Danmarks Nationalbank is responsible for oversight of the Danish components of TARGET2, including Denmark’s connection to the system and the national helpdesk for Danish participants’ inquiries. As regards T2S, Danmarks Nationalbank participates alongside the other central banks connected to the settlement platform.