A study of competing designs for a liquidity-saving mechanism

Antoine Martin and James McAndrews ()

Journal of Banking & Finance, 2010, vol. 34, issue 8, 1818-1826

Abstract: We study two designs for a liquidity-saving mechanism (LSM), a queuing arrangement used with an interbank settlement system. With a balance-reactive LSM, banks can set a balance threshold below which payments are not released from the queue, an action not possible with a receipt-reactive LSM. Payments that are costly to delay are settled earlier with a receipt reactive LSM. Payments that are not costly to delay may be queued with a balance reactive LSM but are always delayed with a receipt reactive LSM. We show that either system can provide higher welfare.

Keywords: Liquidity-saving; mechanisms; Real-time; gross; settlement; Large-value; payment; systems (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (6)

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Working Paper: A study of competing designs for a liquidity-saving mechanism (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:8:p:1818-1826

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