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Sharing the risk of settlement failure

Hiroshi Fujiki, Edward Green and Akira Yamazaki

No 594, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Two policies toward payments-system risk are common, but superficially appear to be contradictory. One policy is to restrict the exposure to risk generated by one participant to other participants who are, by one measure or another, directly concerned with the risky participant. The other policy is to provide a ?safety net,? typically provided by government and funded by taxes collected from all participants and even from non-participants, to share losses due to ?systemic risk.? In this paper, we provide a model in which both of these policies can be constituents of an economically efficient regime of payments-risk management.

Keywords: Payment systems; Risk management (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (19)

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