Payment and Settlement Systems in Finland 1995

This paper is an overview of domestic payment and settlement systems in Finland. It contains an up-to-date description of institutional aspects of payment systems, payment media used by non-banks, interbank exchange and settlement circuits and securities settlement systems. At the end of the paper, annual statistics are presented on payment and settlement systems and on payment media for the years 1989–1994.clearing; settlement; payment media; Finland

Protection of deferred net payment and securities settlement systems: the examples of SIT and Relit.

As the last stage in the risk-prevention programme for the Paris financial centre, the securing of deferred net settlement systems concerns the SIT interbank clearing system, the retail payment system for customer transactions, and Relit, the securities delivery-versus-payment system, which in particular processes transactions effected on the regulated market Euronext Paris. The Banque de France, which is in charge of overseeing the smooth functioning of payment and securities settlement systems has taken the step of asking the French banking community to strengthen the security of the SIT and Relit systems. The aim of this initiative to enhance security (or built-in protection) is to protect these systems, in compliance with the applicable international standards, from settlement risk. The risks borne by the participants in SIT and Relit are systemic in character and this has been accentuated by the recent developments in the European environment in which these systems operate. The protection mechanisms defined for these two systems display similar features: protection against the failure of the participant with the largest settlement obligation, establishment of a permanent common mutual fund for each of the two systems, supplemented where necessary by individual collateral, setting of ceilings for transactions exchanged, and use of central bank money holdings as collateral. The implementation of these safety mechanisms for SIT and Relit will involve various players, who will accordingly take on new responsibilities: participants in the two systems, the administrator of the guarantee fund (a role which will fall to the operator of each of the two systems: GSIT for SIT and Euroclear France for Relit), as well the depository for collateral, which will be the Banque de France.

Behind the money market: clearing and settling money market instruments

Payment systems ; Money market

Behind the money market: clearing and settling money market instruments

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

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

Developments, Issues, and Initiatives in Retail Payments

Innovations in basic information technologies, in payment applications, and in the availability of global markets, as well as substantial changes in financial sector policy, have fundamentally changed how the retail payments system in Canada operates. Principally, the volume and types of electronic payments have grown, and there is increased participation by diverse groups of financial and non-financial institutions as providers of retail payment services. The resulting policy problem for payment systems is how best to benefit from efficiency gains while managing payment risks. O'Connor examines the effect of the technological and legislative changes and the initiatives developed by the public and private sectors in such areas as the market arrangements for services; customer risks and costs for settling large-value retail payments; the security of payment information and the efficiency with which it is transmitted; and the effects of differing regulatory regimes on competition among providers of retail payment services.

The impact of the euro on money and bond markets

The paper provides an analysis of the euro area money and bond markets and their infrastructure since the introduction of the euro. Significant development in terms of integration took place in both markets in general to a various degree for the different segments. However, there remain room for further integration after the first year of Stage III of EMU notably regarding the bond market which lags behind in terms of liquidity, market completeness and overall size compared to the US corporate bond market. Analysis of the barriers to integration, which do not seem to be specific to these markets but apply more generally to euro securities infrastructure, identifies fields where further action is required. This covers (i) the lack of availability of cross-border settlement on a DVP basis, (ii) the lack of standardised legal documentation for repos, (iii) the lack of common practices concerning settlement procedures, (iv) the lack or harmonisation of collateralisation processes between national central banks and interbank operations, (v) the heterogeneity in fiscal and accounting procedures and, (vi) the need for a clearing house.money market, bond market, securities market, financial market integration, euro area, monetary policy.

The economics of TARGET2 balances

It has recently been argued that intra-eurosystem claims and liabilities in the form of TARGET2 balances would raise fundamental issues within the European monetary union. This article provides a framework for the economic analysis of TARGET2 balances and discusses the key arguments behind this recent debate. The analysis is conducted within a system of financial accounts in which TARGET2 balances can arise either due to current account transactions or cross-border capital flows. It is argued that the recent volatility of TARGET2 balances reflects capital flow movements, while the previously prevailing current account positions did not find a strong reflection in TARGET2 balances. Some recent statements regarding TARGET2 appear to be due to a failure to distinguish between the monetary base (a central bank liability concept) and the liquidity deficit of the banking system vis-à-vis the central bank (a central bank asset concept). Furthermore, the article highlights the importance of TARGET2 for the stability of the euro area and points out that the proposal to limit the size of TARGET2 liabilities essentially contradicts the idea of a monetary union.TARGET2, central bank balance sheet, liquidity deficit, financial crisis

Exploring agent-based methods for the analysis of payment systems: a crisis model for StarLogo TNG

agent-based modeling, payment systems, RTGS, liquidity, crisis simulation Abstract: This paper presents an exploratory agent-based model of a real time gross settlement (RTGS) payment system. Banks are represented as agents who exchange payment requests, which are settled according to a set of simple rules. The model features the main elements of a real-life system, including a central bank acting as liquidity provider, and a simplified money market. A simulation exercise using synthetic data of BI-REL (the Italian RTGS) predicts the macroscopic impact of a disruptive event on the flow of interbank payments. The main advantage of agent - based modeling is that we can dynamically see what happens to the major variables involved. In our reduced-scale system, three hypothetical distinct phases emerge after the disruptive event: 1) a liquidity sink effect is generated and the participants’ liquidity expectations turn out to be excessive; 2) an illusory thickening of the money market follows, along with increased payment delays; and, finally 3) defaulted obligations dramatically rise. The banks cannot staunch the losses accruing on defaults, even after they become fully aware of the critical event, and a scenario emerges in which it might be necessary for the central bank to step in as liquidity provider. The methodology presented differs from traditional payment systems simulations featuring deterministic streams of payments dealt with in a centralized manner with static behavior on the part of banks. The paper is within a recent stream of empirical research that attempts to model RTGS with agent – based techniques.

Securities clearing and settlement in China: markets, infrastructures and policy-making

China is taking a more active role on the world stage, even more so since its rapid and strong recovery from the global recession. In the financial realm this expansion is underpinned by a strategy to build strong and competitive capital markets at home. In order to achieve this goal, well-functioning and sound securities infrastructures are an important pre-requisite, and therefore they receive a lot of attention from Chinese policy-makers, as well as from market participants both in China and abroad. This paper evaluates the current market infrastructure, including the legal and regulatory framework, for securities trading, clearing and settlement in mainland China, and analyses the policy-making in this field. The paper finds that, following huge progress in recent years, the post-trading processes are increasingly safe and efficient. It concludes that, given the effectiveness of the policy process, Chinese clearing and settlement are likely to develop into the “modern financial support systems” which the authorities envisage, and which will also be increasingly connected and integrated with other securities markets of global importance. JEL Classification: C21, C43, D12, E31China, Clearing and Settlement, market infrastructure, policymaking, securities market