Liquidity-saving mechanisms in collateral-based RTGS payment systems

Marius Jurgilas and Antoine Martin

Annals of Finance, 2013, vol. 9, issue 1, 29-60

Abstract: This paper studies banks’ incentives regarding the timing of payment submissions in a collateral-based RTGS payment system and how these incentives change with the introduction of a liquidity-saving mechanism (LSM). We show that an LSM allows banks to economise on collateral while also providing incentives to submit payments earlier. This is because in our model an LSM allows payments to be matched and offset in real time without any or very minimal funds. Under a collateral-based RTGS payment system, introduction of the LSM always improves welfare. The result contrasts with earlier work, which shows that under a fee-based RTGS system, the introduction of an LSM in some circumstances may reduce welfare. Copyright Springer-Verlag 2013

Keywords: Liquidity-saving mechanism; Intraday liquidity; Payments (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Liquidity-saving mechanisms in collateral-based RTGS payment systems (2010)
Working Paper: Liquidity-saving mechanisms in collateral-based RTGS payment systems (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:9:y:2013:i:1:p:29-60

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DOI: 10.1007/s10436-010-0160-8

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