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The history of interbank settlement arrangements: exploring central banks’ role in the payment system

Author

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  • Norman, Ben

    (Bank of England)

  • Shaw, Rachel

    (Bank of England)

  • Speight, George

    (Bank of England)

Abstract

Modern central banks have come to view payment systems as a key area of strategic interest, both as part of their responsibilities for financial stability and for the implementation of monetary policy. By considering the evolution of interbank settlement arrangements and central banking functions in the context of a number of diverse historical country case studies, this paper seeks to improve understanding of the development of, and reasons for, central banks’ current roles. Starting from a situation where the earliest banks gradually began to accept claims on each other, banks introduced a variety of innovations to clear and settle between themselves more efficiently. Focusing particularly on the lender of last resort function – a key characteristic of a central bank – this paper explores whether institutions at the centre of clearing and settlement arrangements developed central bank-like characteristics.

Suggested Citation

  • Norman, Ben & Shaw, Rachel & Speight, George, 2011. "The history of interbank settlement arrangements: exploring central banks’ role in the payment system," Bank of England working papers 412, Bank of England.
    • Handle: RePEc:boe:boeewp:0412
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    References listed on IDEAS

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    Cited by:

    1. Bossone, Biagio, 2021. "Commercial bank seigniorage and the macroeconomy," International Review of Financial Analysis, Elsevier, vol. 76(C).
    2. Bindseil, Ulrich & Pantelopoulos, George, 2022. "A brief history of payment netting and settlement," IBF Paper Series 02-22, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    3. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    4. Tomura, Hajime, 2018. "Payment instruments and collateral in the interbank payment system," Journal of Economic Theory, Elsevier, vol. 178(C), pages 82-104.
    5. Benos, Evangelos & Ferrara, Gerardo & Gurrola-Perez, Pedro, 2017. "The impact of de-tiering in the United Kingdom’s large-value payment system," Bank of England working papers 676, Bank of England.
    6. Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).
    7. Biagio Bossone, 2021. "Bank Money Creation and the Payments System," Working Papers PKWP2117, Post Keynesian Economics Society (PKES).
    8. Chmielewski Tomasz & Sławiński Andrzej, 2019. "Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort," Economics and Business Review, Sciendo, vol. 5(2), pages 48-63, June.
    9. Jonathan Witmer, 2020. "Monetary Policy Independence and the Strength of the Global Financial Cycle," Staff Working Papers 20-26, Bank of Canada.
    10. Christine Parlour, 2017. "Making Money: Commercial Banks, Liquidity Transformation and the Payment System," 2017 Meeting Papers 388, Society for Economic Dynamics.

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    More about this item

    Keywords

    Monetary history; central banking; payments clearing and settlement;
    All these keywords.

    JEL classification:

    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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