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The explosive growth in the volume of transactions in highly liquid national and international money, derivative, and capital markets during the last ten years -- the so-called commoditization of finance -- has produced a corresponding increase in flows of gross domestic and international payments. These flows are facilitated by an interlocking network of national and international wholesale payment systems that are at the core of the world's major financial systems. It is widely recognized that a disturbance in one of these payment systems -- an operational mishap, the failure of a major counterparty, a liquidity problem in one of the money markets -- could have serious consequences for global trade and finance. Sections II and II of this paper review the nature and the objectives of ongoing and planned payment system reforms in the United States, and major European Union countries. Section IV discusses the impact of these reforms on the financial system, with particular emphasis on the implication for the availability and cost of intraday liquidity in financial markets. Section V examines the impact of the ongoing shift toward real-time, gross settlement payment systems -- the preferrred type of system for wholesale payments -- on liquidity, the relationship among yields of securities of varying liquidity, bid-ask spreads, and payments conventions in securities markets. The concluding section identifies some unresolved issues.
This paper reviews the ongoing efforts to reduce the risks inherent in the world`s principal wholesale payment systems. The paper assesses the major policy proposals to contain the growth in intraday credit exposures that arises in net settlement wholesale payment systems and in the real-time gross systems in which the central bank provides daylight overdrafts. It also discusses the benefits of these risk-management policies, and we assess the adverse impact of applying interest charges for intraday central-bank credit or of collateralizing such credit on liquidity in financial markets.
This paper reviews the ongoing efforts to reduce the risks inherent in the world’s principal wholesale payment systems. The paper assesses the major policy proposals to contain the growth in intraday credit exposures that arises in net settlement wholesale payment systems and in the real-time gross systems in which the central bank provides daylight overdrafts. It also discusses the benefits of these risk-management policies, and we assess the adverse impact of applying interest charges for intraday central-bank credit or of collateralizing such credit on liquidity in financial markets.
Properly designed wholesale payments system can make a significant contribution to enhancing market discipline in the financial sector, reducing the risk of systemic disturbance and permitting a less extensive safety net for financial institutions. The objective of these reforms has been to achieve a reduction of the credit risk associated with the growth in intraday credit exposures that arises in net settlement systems and in real-time gross systems when the central bank provides daylight overdrafts. Intraday payments-related credit in net settlement systems has been reduced by restructuring payment systems into real-time gross settlement systems with collateralized overdrafts, while in the existing real-time gross settlement systems, the risk-abatement program currently in effect has taken the form of caps and charges on uncollateralized daylight credit.
"This book is designed to provide the reader with an insight into the main concepts involved in the handling of payments, securities and derivatives and the organisation and functioning of the market infrastructure concerned. Emphasis is placed on the general principles governing the functioning of the relevant systems and processes and the presentation of the underlying economic, business, legal, institutional, organisational and policy issues. The book is aimed at decision-makers, practitioners, lawyers and academics wishing to acquire a deeper understanding of market infrastructure issues. It should also prove useful for students with an interest in monetary and financial issues."--Introduction (Pg. 20, para 8).
Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.