The impact of payment splitting on liquidity requirements in RTGS
This paper examines the impact that payment splitting could have upon the liquidity requirements and efficiency of a large-value payment system, such as the United Kingdom’s CHAPS. Using the Bank of Finland Payment and Settlement Simulator and real UK payments data we find that payment splitting could reduce the liquidity required to settle payments. The reduction in required liquidity would increase as the payment splitting threshold decreased but the relationship is non-linear. Liquidity savings are not homogeneously distributed, with some banks benefiting more than others.
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| Length: | 35 pages |
| Date of creation: | 28 Oct 2010 |
| Handle: | RePEc:boe:boeewp:0404 |
| Contact details of provider: | Postal: Bank of England, Threadneedle Street, London, EC2R 8AH Phone: +44 (0)171 601 4030 Fax: +44 (0)171 601 5196 Web page: http://www.bankofengland.co.uk/ Email: More information through EDIRC
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beyeler, Walter E. & Glass, Robert J. & Bech, Morten L. & Soramäki, Kimmo, 2007.
"Congestion and cascades in payment systems,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 384(2), pages 693-718.
- Walter E. Beyeler & Robert J. Glass & Morten L. Bech & Kimmo Soramaki, 2006. "Congestion and cascades in payment systems," Staff Reports 259, Federal Reserve Bank of New York.
- Christopher Becher & Marco Galbiati & Merxe Tudela, 2008. "The timing and funding of CHAPS sterling payments," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 113-133.
- Kurt Johnson & James J. McAndrews & Kimmo Soramaki, 2004. "Economizing on liquidity with deferred settlement mechanisms," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 51-72. Full references (including those not matched with items on IDEAS)
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