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Intraday liquidity facilities, late settlement fee and coordination

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  • Nellen, Thomas

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.

Suggested Citation

  • Nellen, Thomas, 2019. "Intraday liquidity facilities, late settlement fee and coordination," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 124-131.
    • Handle: RePEc:eee:jbfina:v:106:y:2019:i:c:p:124-131
    DOI: 10.1016/j.jbankfin.2019.06.009
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    References listed on IDEAS

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    Cited by:

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    2. Maria Rosa Borges & Lauriano Ulica & Mariya Gubareva, 2020. "Systemic risk in the Angolan interbank payment system – a network approach," Applied Economics, Taylor & Francis Journals, vol. 52(45), pages 4900-4912, September.
    3. Son, Bumho & Jang, Huisu, 2023. "Economics of blockchain-based securities settlement," Research in International Business and Finance, Elsevier, vol. 64(C).
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    More about this item

    Keywords

    Real-time gross settlement; Intraday liquidity facility; Collateralisation; Late settlement fee; Settlement risk;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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