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Interlinkages between payment and securities settlement systems

Author

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  • David Mills
  • Samia Husain

Abstract

Payments systems involve a number of interconnected systems that center around a large-value payment system through which banks send funds to each other for various purposes. Of fundamental interest to central banks are the interlinkages among these types of systems. This paper builds on Mills and Nesmith (J Monet Econ 55:542–553, 2008 ) to construct a relatively simple economic framework to begin to understand some of the different linkages of such systems with particular emphasis on the impact various disruptions may have. It looks at three alternative arrangements through which a funds transfer system and securities settlement system are linked. Each arrangement differs by the way the securities settlement system is designed. The main finding is that, although the different arrangements have different possible implications during a settlement shock ex ante, the equilibrium behavior of banks leads to the arrangements having similar implications ex post. Copyright Springer-Verlag (outside the USA) 2013

Suggested Citation

  • David Mills & Samia Husain, 2013. "Interlinkages between payment and securities settlement systems," Annals of Finance, Springer, vol. 9(1), pages 61-81, February.
    • Handle: RePEc:kap:annfin:v:9:y:2013:i:1:p:61-81
    DOI: 10.1007/s10436-012-0198-x
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    References listed on IDEAS

    as
    1. Bech, Morten L. & Garratt, Rod, 2003. "The intraday liquidity management game," Journal of Economic Theory, Elsevier, vol. 109(2), pages 198-219, April.
    2. Mills Jr., David C. & Nesmith, Travis D., 2008. "Risk and concentration in payment and securities settlement systems," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 542-553, April.
    3. Ian Nield, 2006. "Changes to liquidity management regime," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 1-6, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. M. Peiris & Alexandros Vardoulakis, 2015. "Collateral and the efficiency of monetary policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 579-603, August.
    2. Dr. Thomas Nellen, 2015. "Collateralised liquidity, two-part tariff and settlement coordination," Working Papers 2015-13, Swiss National Bank.
    3. Nellen, Thomas, 2019. "Intraday liquidity facilities, late settlement fee and coordination," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 124-131.

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    More about this item

    Keywords

    Interbank payments; Securities settlement; Strategic games; Bank behavior; E58; G21; D81;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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