Summary and Final Considerations

Marco Rossi
Additional contact information
Marco Rossi: International Monetary Fund

Chapter 7 in Payment Systems in the Financial Markets, 1998, pp 125-137 from Palgrave Macmillan

Abstract: Abstract Until recently, most of the principal large-value payment systems operated in a manner that allowed the creation of large volumes of intraday credit amongst their members: payments were settled net between the sending and the receiving banks at the end of the day. In some cases, banks had little incentive to control/price the consequent credit risk, as the exposures were typically so large that the central bank would have felt obliged to intervene in the event of settlement default in order to prevent clearing banks failures from having systemic consequences. In the late 1980s, operational arrangements and practices in net payment systems underwent some extensive revisions which resulted not only in the implementation of risk-reduction policies such as net bilateral credit limits, net debit caps and loss-sharing rules, but also in the recognition of the importance of an immediate and irrevocable availability of funds to the receiving bank (finality of payment). The principle of the irrevocability of settlement in all large-value fund transfer systems and technological improvements in the way payment orders could be processed supported the idea of transforming payment arrangements entirely by changing the settlement method itself: fund transfer instructions should be settled on a payment-by-payment basis (gross settlement) as soon as they are posted to the system (real-time settlement).

Keywords: Central Bank; Credit Risk; Payment System; Individual Bank; Fund Market (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-26374-5_7

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349263745

DOI: 10.1007/978-1-349-26374-5_7

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().