Real-Time Gross Settlement and hybrid payment systems: a comparison
This paper contrasts Real-Time Gross Settlement and hybrid payment systems that are based on payment offset, using a two-period, multi-bank model. The comparison is performed according to two criteria: liquidity needs and speed of settlement. We assume that the existence of a payment is common knowledge but that the specific degree of time-criticality of a payment is the private information of the bank sending the payment. Hybrid payment systems are shown to outperform Real-Time Gross Settlement when payments are offset in the first period and when they are offset in both periods. This suggests that in a hybrid system, the offsetting facility should be in operation all day, or, at the very least, for some time after the system opens in the morning. A system in which the offsetting facility was only switched on late in the day would not necessarily be preferred to Real-Time Gross Settlement. These results are shown to be robust to changes in the transparency of the central queue of payments awaiting offset. However, this robustness may not hold with different forms of information asymmetry.
|Date of creation:||Mar 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
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.:
- Bech, Morten L. & Garratt, Rod, 2003.
"The intraday liquidity management game,"
Journal of Economic Theory,
Elsevier, vol. 109(2), pages 198-219, April.
- Bech, Morten L. & Garratt, Rod, 2001. "The Intraday Liquidity Management Game," University of California at Santa Barbara, Economics Working Paper Series qt0m6035wg, Department of Economics, UC Santa Barbara.
- Kobayakawa, Shuji, 1997. "The Comparative Analysis of Settlement Systems," CEPR Discussion Papers 1667, C.E.P.R. Discussion Papers.
- Angelini, Paolo, 1998. "An analysis of competitive externalities in gross settlement systems," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 1-18, January.
- William Roberds, 1993. "The rise of electronic payments networks and the future role of the Fed with regard to payment finality," Economic Review, Federal Reserve Bank of Atlanta, issue Mar, pages 1-22.
- Leinonen, Harry & Soramäki, Kimmo, 1999. "Optimizing Liquidity Usage and Settlement Speed in Payment Systems," Research Discussion Papers 16/1999, Bank of Finland.
- S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:252. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.