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Does SIC need a heart pacemaker?

Author

Listed:
  • Robert Oleschak
  • Thomas Nellen

Abstract

Real-time gross settlement (RTGS) systems effect final settlement of payments continuously and on an individual basis. This generates a trade-off between liquidity needs and settlement delay. Against the background of reconstruction discussions, the paper analyses whether more advanced algorithms reduce liquidity needs and settlement delay if applied to the Swiss Interbank Clearing (SIC) system. Simulations run with the BoF-PSS2 simulator show that expected reductions in liquidity needs and settlement delay are modest and should carefully be evaluated against costs. More advanced settlement algorithms improve settlement efficiency only if payment release behaviour is highly aligned.

Suggested Citation

  • Robert Oleschak & Thomas Nellen, 2013. "Does SIC need a heart pacemaker?," Working Papers 2013-10, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2013-10
    as

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    File URL: https://www.snb.ch/n/mmr/reference/working_paper_2013_10/source/working_paper_2013_10.n.pdf
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    References listed on IDEAS

    as
    1. Martin, Antoine & McAndrews, James, 2008. "Liquidity-saving mechanisms," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 554-567, April.
    2. Angelini, Paolo, 1998. "An analysis of competitive externalities in gross settlement systems," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 1-18, January.
    3. Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
    4. Denbee, Edward & Norman, Ben, 2010. "The impact of payment splitting on liquidity requirements in RTGS," Bank of England working papers 404, Bank of England.
    5. Sébastien Kraenzlin & Thomas Nellen, 2010. "Daytime Is Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1689-1702, December.
    6. Morten L. Bech & Bart Hobijn, 2007. "Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 147-181, September.
    7. Antoine Martin & James J. McAndrews, 2008. "An economic analysis of liquidity-saving mechanisms," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 25-39.
    8. Ota, Tomohiro, 2011. "Intraday two-part tariff in payment systems," Bank of England working papers 428, Bank of England.
    9. Guntzer, Michael M. & Jungnickel, Dieter & Leclerc, Matthias, 1998. "Efficient algorithms for the clearing of interbank payments," European Journal of Operational Research, Elsevier, vol. 106(1), pages 212-219, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    payment system; simulation; payment splitting; liquidity-saving mechanisms;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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