What Can We Learn from the Timing of Interbank Payments?

Adam Copeland, Linsey Molloy and Anya Tarascina

No 20190225, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: From 2008 to 2014 the Federal Reserve vastly increased the size of its balance sheet, mainly through its large-scale asset purchase programs (LSAPs). The resulting abundance of reserves affected the financial system in a number of ways, including by changing the intraday timing of interbank payments. In this post we show that (1) there appears to be a nonlinear relationship between the amount of reserves in the system and the timing of interbank payments, and (2) with the increase in reserves, smaller banks shifted their timing of payments more significantly than larger banks did. This result suggests that tracking the timing of payments sent by banks could provide an informative signal about the impact of the shrinking Federal Reserve balance sheet on the payments system.

Keywords: intraday credit; balance sheet normalization; payments (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2019-02-25
New Economics Papers: this item is included in nep-acc and nep-ore
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