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Intraday liquidity facilities, late settlement fee and coordination

Thomas Nellen ()

Journal of Banking & Finance, 2019, vol. 106, issue C, 124-131

Abstract: This paper analyses the intraday liquidity management game played in large-value payment systems accounting for a variable and a fixed cost of liquidity. While the liquidity cost is a decisive factor for settlement behaviour, the availability of intraday liquidity until end-of-day matters too, as it mutes late settlement incentives originating from settlement risk. Whether liquidity is provided via overdraft or intraday credit hardly matters. A late settlement fee can both disincentivise settlement coordination or implement early settlement. Its calibration is usually non-trivial with the major exception of a fixed cost and end-of-day availability of intraday liquidity.

Keywords: Real-time gross settlement; Intraday liquidity facility; Collateralisation; Late settlement fee; Settlement risk (search for similar items in EconPapers)
JEL-codes: E42 E58 G23 G28 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jbankfin.2019.06.009

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Handle: RePEc:eee:jbfina:v:106:y:2019:i:c:p:124-131