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Settlement risk in large-value payments systems

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  • Pu Shen

Abstract

The phenomenal growth of financial market and trading activities worldwide has led to tremendous growth in large-value payments systems. Large-value payments systems are the electronic banks used to transfer large payments among themselves. Payment orders processed in such systems in the United States, for example, are typically well above $1 million. ; The tremendous growth of payments system use throughout the world has increased both the possibility of settlement failures and the potential impact of such failures. In 1996, the average turnover in a single day exceeded the combined capital of the top 100 U.S. banks. Regulators are especially concerned that payments systems might turn a local financial crisis into a global systemic crisis. Shen examines settlement risk in large-value payments systems and discusses some of the measures available to manage such risk.

Suggested Citation

  • Pu Shen, 1997. "Settlement risk in large-value payments systems," Economic Review, Federal Reserve Bank of Kansas City, vol. 82(Q II), pages 45-62.
    • Handle: RePEc:fip:fedker:y:1997:i:qii:p:45-62:n:v.82no.2
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    References listed on IDEAS

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    1. Dirk Schoenmaker & Mr. Peter M. Garber & Mr. D. F. I. Folkerts-Landau, 1996. "The Reform of Wholesale Payment Systems and its Impacton Financial Markets," IMF Working Papers 1996/037, International Monetary Fund.
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    5. Berger, Allen N & Hancock, Diana & Marquardt, Jeffrey C, 1996. "A Framework for Analyzing Efficiency, Risks, Costs, and Innovations in the Payments System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 696-732, November.
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    Cited by:

    1. Selgin, George, 2004. "Wholesale payments: questioning the market-failure hypothesis," International Review of Law and Economics, Elsevier, vol. 24(3), pages 333-350, September.
    2. Obstfeld, Maurice, 1998. "EMU: Ready, or Not?," Center for International and Development Economics Research, Working Paper Series qt8qn3v8j3, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    3. William R. Emmons, 1997. "Recent developments in wholesale payments systems," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 23-43.
    4. Tore Nilssen, 2011. "Risk externalities in a payments oligopoly," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(3), pages 211-234, December.
    5. Richard J. Sullivan, 2012. "The Federal Reserve’s reduced role in retail payments: implications for efficiency and risk," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q III).

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