A proposal for a decentralized liquidity savings mechanism with side payments

Author

Adam FUGAL
Rodney GARRATT
Zhiling GUO, Singapore Management UniversityFollow
Dave HUDSON

Publication Type

Report

Version

submittedVersion

Publication Date

6-2018

Abstract

In most countries, the central bank provides the medium to physically settle the smallest payments (cash) and the means to electronically settle the largest payments, which typically are wholesale payments between banks. For the latter purpose the central bank usually operates a system through which banks can settle payments in central bank money. Historically, interbank payments were settled via (end of day) netting systems, but as volumes and values increased central banks became worried about the risks inherent in deferred net settlement systems, so most central banks opted for the implementation of a Real Time Gross Settlement (RTGS) system. With RTGS, payments are processed individually, immediately and with finality during operational hours. This eliminates settlement risk and the potential unwinding of payments, at the cost of increased need for liquidity provision by participants.

Discipline

Databases and Information Systems | E-Commerce | Finance and Financial Management

Research Areas

Information Systems and Management

First Page

1

Last Page

21

Publisher

R3 Reports

City or Country

New York

Citation

FUGAL, Adam; GARRATT, Rodney; GUO, Zhiling; and HUDSON, Dave. A proposal for a decentralized liquidity savings mechanism with side payments. (2018). 1-21.
Available at: https://ink.library.smu.edu.sg/sis_research/4108

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.