Norges Bank has released its Financial Infrastructure Report 2021 and Norges Bank Papers 2/2021, titled “Retail payment services 2020.”
Norges Bank notes that there have been significantly fewer disruptions in the Norwegian financial infrastructure during the past few years, and the infrastructure has been working well, even during the COVID-19 crisis. Norges Bank claims that the functioning of the financial infrastructure is adequately secure and efficient as well.
Among the most (potentially) damaging threats to essential financial infrastructure is digital mapping and sabotage, the bank noted while adding that an attack on one system may lead to serious consequences for other parts of the financial infrastructure and even for the entire financial ecosystem.
Deputy Governor Ida Wolden Bache stated:
“Testing for and identifying risks of cyber incidents in the banking and payment system can be improved. The Financial Supervisory Authority of Norway and Norges Bank have drawn up a proposal for testing the cyber resilience of the Norwegian financial sector. This testing will give us a better insight into vulnerabilities and how they can lead to systemic risk and pose a threat to financial stability”
Payments, where the funds are accessible via the payee’s account seconds after the payment has been initiated, are referred to as real-time payments. A properly functioning system for real-time payments is considered a key part of an efficient payment platform.
The infrastructure needed for real-time payments was improved last year, however, retail services built on top of the underlying infrastructure need to be further enhanced.
The Deputy Governor added:
“Norges Bank is now assessing how the real-time payment infrastructure can best be further developed, including whether Norges Bank should expand its operational role. This matter will soon be circulated for comment by the industry and other stakeholders.”
At present, Norges Bank issues central bank currency in the form of cash. Reserve bank money has key attributes or characteristics that help maintain confidence in the existing monetary system and overall payment system efficiency. For reserve bank money to have such characteristics, it needs to be accessible and also easy to use by the public.
Norges Bank is trying to determine the feasibility of issuing a central bank digital currency or CBDC.
Norges Bank’s research is being conducted after observing the declining use of cash and also as a proactive measure against unwanted structural changes in the current monetary and payment system.
Norges Bank reports that it has decided to continue with its research efforts, which reportedly includes experimental testing of various technical solutions.
The bank acknowledges that many investors are now interested in making investments in crypto-assets, and payment service providers (PSPs) have also made them easily available to their clients as a payment option.
Although the underlying (blockchain or DLT) technology offers good opportunities, crypto-assets also come with significant risks that need to be properly regulated, the bank added.
The Deputy Governor also mentioned:
“Increased use of crypto-assets may be important for the safety and efficiency of the payment system. Norges Bank is closely monitoring the payment system and will help to ensure that it will also be attractive and safe to pay in NOK in the future.”