🌍 What is PFMI?
The Principles for Financial Market Infrastructures (PFMI) represent the global standards that ensure the safety, efficiency, and resilience of financial systems worldwide.
They were jointly developed by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) in April 2012.
In this article, we’ll explore what PFMI is, why it was introduced, and how it supports payment systems oversight and global financial stability.
These principles serve as the foundation for oversight and supervision of financial market infrastructures (FMIs) — the systems and entities responsible for payments, clearing, settlement, and the recording of financial transactions.
💡 Why PFMI Was Introduced
Before 2012, several global financial crises — particularly the 2008 crisis — exposed significant weaknesses in how payment, clearing, and settlement systems managed risk.
There was a clear need for stronger, more consistent international standards to:
- Reduce systemic risk that could threaten global financial stability.
- Promote transparency and efficiency in the operation of financial infrastructures.
- Encourage cross-border cooperation among regulators and central banks.
The PFMI replaced and consolidated three previous international standards:
- Core Principles for Systemically Important Payment Systems (CPSIPS) – 2001
- Recommendations for Securities Settlement Systems (RSSS) – 2001
- Recommendations for Central Counterparties (RCCP) – 2004
Together, these evolved into one robust and unified framework: the PFMI.
🏦 What Are Financial Market Infrastructures (FMIs)?
FMIs are the backbone of the financial system.
They enable money, securities, and derivatives to move safely and efficiently between participants.
According to the PFMI, there are five main types of FMIs:
| FMI Type | Description |
|---|---|
| Payment Systems | Facilitate the transfer of funds between participants (e.g., RTGS, instant payment systems). |
| Central Securities Depositories (CSDs) | Hold securities and enable their transfer electronically. |
| Securities Settlement Systems (SSSs) | Ensure the settlement of securities transactions. |
| Central Counterparties (CCPs) | Interpose themselves between counterparties to reduce counterparty risk. |
| Trade Repositories (TRs) | Collect and maintain records of derivatives transactions for transparency. |
🧭 Who Should Apply the PFMI?
The PFMI applies to all Financial Market Infrastructures, such as payment systems, CCPs, CSDs, and trade repositories.
It also provides guidance for central banks, regulators, and supervisory authorities, defining their roles in implementing, monitoring, and enforcing PFMI standards.
This dual focus — on both FMIs and authorities — ensures a complete oversight ecosystem where governance, risk, and compliance are all aligned.
⚖️ The Objectives of PFMI
The PFMI framework was designed to achieve three primary goals:
- Enhance Financial Stability
By reducing systemic risk and preventing disruptions in critical infrastructures. - Increase Transparency and Efficiency
Through standardized disclosure and governance requirements. - Strengthen Oversight and Regulation
By establishing a consistent international benchmark for FMI supervision.
🧩 The Structure of PFMI
The framework is organized into two main components:
- 24 Principles — applicable to FMIs, covering governance, credit and liquidity risk, settlement, efficiency, and transparency.
- 5 Responsibilities — applicable to authorities (central banks and regulators), outlining how they should oversee and assess FMIs.
This structure guarantees accountability at both institutional and regulatory levels.
🧠 Why PFMI Matters
Adopting PFMI isn’t just about compliance — it’s about building trust, resilience, and credibility in a country’s financial market infrastructure.
For instance, Singapore successfully aligned its regulatory framework with PFMI through the Monetary Authority of Singapore (MAS).
This alignment improved the country’s ability to manage financial risks, strengthened investor confidence, and supported cross-border cooperation with global systems.
Countries that apply PFMI typically experience:
- Higher confidence from international investors and counterparties.
- Improved management of systemic and operational risks.
- Greater regulatory cooperation and interoperability.
🌐 Global Implementation
Today, major jurisdictions — including the European Union, Australia, Canada, and Singapore — have embedded PFMI within their oversight frameworks.
The CPMI-IOSCO continues to monitor implementation through regular assessment reports, ensuring that FMIs maintain consistency with global standards.
This continuous evaluation helps strengthen financial stability and builds a resilient oversight culture across markets.
💼 From Framework to Practice
Understanding PFMI is not just theoretical — it’s the foundation for how payment system oversight operates globally, from policy design and risk assessment to on-site inspections and compliance reviews.
Central banks and regulators use PFMI as a reference for drafting oversight frameworks, licensing FMIs, and monitoring performance indicators.
In short, PFMI is the bridge between policy principles and operational resilience.
📘 Conclusion
The PFMI framework is one of the most influential international standards for ensuring safe, transparent, and efficient financial infrastructures.
It defines how FMIs should operate, how authorities should supervise them, and how countries can align with global best practices.
Understanding PFMI is the first essential step for regulators, payment experts, and oversight professionals aiming to strengthen financial stability in their markets.
🔗 What’s Next?
In the next post, we’ll break down
👉 “The Structure and Scope of the PFMI Framework”,
to understand how the 24 Principles and 5 Responsibilities are organized — and who exactly they apply to.
📚 References & Sources
- CPMI-IOSCO (2012) – Principles for Financial Market Infrastructures (PFMI), Bank for International Settlements
👉 https://www.bis.org/cpmi/publ/d101.htm - CPMI-IOSCO (2016) – Implementation monitoring of PFMI: Level 2 assessments
👉 https://www.bis.org/cpmi/publ/d148.htm