Payments systems have been recognised only relatively recently as being a central issue for the stability of the financial system. In this speech, the Governor traces the emerging recognition over the last ten to twenty years of the risk inherent in existing interbank payment systems, and identifies the key issue for banks as one of how best to provide a high quality service to users of payment systems at the same time as controlling the often massive intra-day credit risk which occurs between banks. In discussing the different ways of controlling interbank payment system risk, the Governor endorses the decision in principle by the APACS banks to eliminate (rather than reduce) such risk by introducing gross real-time settlement in CHAPS. He argues that, in moving towards such a system, the 'trade-off' between inefficiency and cost is in many ways more apparent than real; and discusses some of the ways in which the precise role of central banks in payment systems might change. The Governor also considers the implications of developments in the European Community for domestic payment systems and for the Ecu settlement system" and suggests that there must be attractions to trying to incorporate as much as possible of the existing infrastructure of domestic systems into whatever emerges in the later stages of EMU. For both banks and non-banks, the introduction of real-time gross settlement will encourage them to manage their own payment flows carefully. It will also provide a basis for developing better delivery versus payment mechanisms in a number of markets.