33 research outputs found

    The discount window

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    An abstract for this article is not availableDiscount window ; Federal Reserve banks

    The discount window

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    Money market

    The case for interstate branch banking

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    During the 1980’s, many states relaxed laws restricting branching, and most states opened up their borders to entry by out-of-state bank holding companies. This article suggests that both banks and consumers would benefit if laws were further modified to permit bank holding companies to consolidate their interstate subsidiaries into branch networks. While such a change is likely to lead to a smaller number of large banks (although those remaining would operate nationwide), there would probably be little change in the number of small banks serving local markets.Interstate banking ; Branch banks

    Daylight overdrafts and payments system risks

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    During the last several years, the banking community has become increasingly aware of the risks faced by participants on electronic funds transfer (EFT) networks. Of particular concern have been the volume and incidence of “daylight overdrafts” on Fedwire and the risk of systemic failure due to the failure of a participant on one of the private EFT networks. In this article, David L. Mengle develops an economic framework for analyzing the risks borne by network participants, and then discusses several alternative risk reduction measures. Mengle argues that, on Fedwire, pricing of daylight overdrafts would create incentives for banks to reduce such overdrafts and would serve to lower the risk now assumed by the public. On the private networks, he suggests that a discount window lending policy to avert system failure could be structured to give banks incentives to limit risk exposure. Although current policies seek to reduce risks by placing direct controls on daylight overdrafts, it may be advisable to supplement these policies with measures that force banks to face the costs they impose on the rest of the payments system.Banks and banking ; Payment systems ; Risk

    Behind the money market: clearing and settling money market instruments

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    Payment systems ; Money market

    Daylight overdrafts and payments system risks

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    During the last several years, the banking community has become increasingly aware of the risks faced by participants on electronic funds transfer (EFT) networks. Of particular concern have been the volume and incidence of “daylight overdrafts” on Fedwire and the risk of systemic failure due to the failure of a participant on one of the private EFT networks. In this article, David L. Mengle develops an economic framework for analyzing the risks borne by network participants, and then discusses several alternative risk reduction measures. Mengle argues that, on Fedwire, pricing of daylight overdrafts would create incentives for banks to reduce such overdrafts and would serve to lower the risk now assumed by the public. On the private networks, he suggests that a discount window lending policy to avert system failure could be structured to give banks incentives to limit risk exposure. Although current policies seek to reduce risks by placing direct controls on daylight overdrafts, it may be advisable to supplement these policies with measures that force banks to face the costs they impose on the rest of the payments system.Banks and banking ; Payment systems ; Risk

    Behind the money market: clearing and settling money market instruments

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    When a money market instrument is traded, the clearing and settlement process establishes the change in ownership. Because the process involves both costs and risks, money market participants have developed means of making clearing and settlement more efficient and less risky.Money market ; Payment systems

    Behind the money market: clearing and settling money market instruments

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    When a money market instrument is traded, the clearing and settlement process establishes the change in ownership. Because the process involves both costs and risks, money market participants have developed means of making clearing and settlement more efficient and less risky.Money market ; Payment systems

    The future of deposit insurance: an analysis of the alternatives

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    Deposit insurance, while reducing the threat of bank runs, also lessens bankers’ incentives to control risks. Reforms of the deposit insurance system are necessary to discourage excessive risk taking such as characterized the recent S&L crisis. The adoption of market value accounting, early closing of failed banks, and exposing uninsured depositors and creditors to losses—all would give bankers less incentives to take excessive risks with insured deposits.Deposit insurance ; Bank failures

    SIC: Switzerland's new electronic interbank payment system

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    It is an article of faith among American bankers and their regulators that some daylight overdrafts are necessary to the efficient functioning of large-dollar wire transfer systems. But the Swiss have injected an element of doubt by developing a system that does away with daylight overdrafts. Their new system processes a payment only if sufficient clearing funds are on deposit in the sending bank’s reserve account. If sufficient funds are not available, the payment is held in a queue until covering funds have arrived. Vital and Mengle describe the first eighteen months of the system’s operation.Payment systems ; Overdrafts
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