In its April 2011 interim report, the Independent Commission on Banking – set up by the coalition government to find reforms that would promote stability and competition in banking – asked a deceptively simple question: what is the financial system for? Answers included to help manage risks and financial needs, to lend, and to provide deposittaking facilities and a store-of-value system. But the ICB identified the primary purpose of the financial system as being to support the wider economy through the provision of payments systems.
The report acknowledged that banks have developed complex networks to enable safe and efficient transfer of funds. It emphasised that payments systems sit at the heart of the banking system – any disruption could destabilise financial markets and cause wider economic turmoil.
The continuing effectiveness of any system is not guaranteed and the articles in this supplement show how improvements are an ongoing process. By highlighting the centrality of payments systems the ICB provided a reminder of the important roles that corporate treasurers and bankers play in keeping the wheels of commerce and industry turning.
As the final report is drawn up this autumn, any ICB proposals enacted by the government should be constructed to ensure that these crucial systems are least left unharmed, and ideally enhanced.