Abstract: This paper examines a central bank's choice of intraday credit
policy for Real-Time Gross Settlement (RTGS) systems. Formal
analysis of central bank objectives and commercial bank payment
activity provides insight into both the choice and effects of
several possible intraday credit policies. Observed intraday credit
policies are interpreted within the context of the model. Among G-10
central banks, different combinations of prices, collateral, and
quantity limits have been chosen to manage the supply of intraday
credit. Conditions that rationalize these choices are shown to rely
on a) central bank preferences regarding credit risk and systemic
risk, b) liquidity management technologies, and c) the cost of
collateral.
Keywords: Daylight credit, payment systems, RTGS, intraday credit
Full paper (1308 KB PDF)
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Last update: September 30, 1997
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