Intraday Liquidity Demand of Banks in Real-Time Gross Settlement System

Intraday liquidity management in gross settlement system as a coordination game

Real time gross settlement systems (RTGS-systems) operated by central banks are the predominant form of large value payment systems. They allow execution of fund transfers between central bank accounts of commercial banks and other financial institutions as a continuous process by settling payments individually, with their full value and with immediate finality. Because individual payments are ...

Intraday Liquidity in Gross Payment Systems

The purpose of this paper is to make a comparative analysis of modern gross payment systems, emphasizing on the implications of the availability of intraday liquidity and the different mechanisms used to provide this liquidity. The possibility of default and the risk of the intraday credit are first introduced to determine the implications of its existence on banks’ behaviour and on the probabi...

Real Time Gross Settlement Systems: An Overview

Intraday Liquidity Management: A Tale of Games Banks Play

The value and volume of interbank payments increased dramatically throughout the 1980s and 1990s as a result of rapid financial innovation and the integration and globalization of financial markets. In the United States, settlement of interbank payments grew from $300 trillion in 1985, or forty-five times GDP, to almost $500 trillion in 1995, or seventy-five times GDP (Bech, Preisig, and Soramä...

Payment system reform in New Zealand – the start of real time gross settlement

From March 1998, the inter-bank settlement of most high value wholesale payments in New Zealand will occur on a real time gross settlement (RTGS) basis. This means that the interbank transfer of funds associated with each such payment will be posted to the exchange settlement accounts of the paying and receiving banks at the Reserve Bank, transaction by transaction, irrevocably and ahead of val...

The intraday liquidity management game

We use a game theoretical framework to analyze the intraday behavior of banks with respect to settlement of interbank claims in a real-time gross settlement setting. The game played by banks depends upon the intraday credit policy of the central bank and it encompasses two well-known game theoretical paradigms: the prisoner’s dilemma and the stag hunt. The former arises in a collateralized cred...