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Central banks have traditionally influenced payment and settlement systems primarily by being banks which provide a variety of payment and settlement services to other banks. As such, central banks provide a safe settlement asset and in most cases they operate systems which allow for the transfer of that settlement asset. It is only relatively recently that oversight has become a function that is more formal and systematic - namely a function whereby the objectives of safety and efficiency are promoted by monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change. However, although recent, this development in the nature of oversight has been rapid and the function has now come to be generally recognised as a core responsibility of central banks. Given this importance, and the experience that has been gained over the years, the Committee on Payment and Settlement Systems felt it would be useful to set out publicly what has been learned about effective oversight. Most of this report is descriptive and analytical, explaining why and how central banks oversee payment and settlement systems. It looks at the need for oversight, the source of central banks' responsibilities for oversight, the scope of oversight and the activities that oversight involves. In addition it looks at cooperative oversight, where more than one central bank or other authority has responsibilities for a system. However, as well as this description and analysis, the report also includes 10 principles for effective oversight, each with explanatory text. Five of the principles are generally applicable to oversight arrangements while the other five are specifically for cooperative oversight arrangements. All the principles are consistent with, and indeed largely drawn from, the previous work on payment and settlement systems published by the Committee and earlier groups reporting to the G10 Governors.