Remarks to “Liquidity Saving Mechanisms and Bank
behaviour”, presented by Marco Galbiati and Kimmo
Soramäki
Kristian Sparre Andersen
Danmarks Nationalbank, Payment Systems
6th Payment and Settlement Simulation Seminar,
Bank of Finland, Helsinki, 27 August 2008
The rationale behind the paper
‹
Central banks care about smooth and efficient settlement
of payments through their systems
‹
But they also care about financial stability so they will not allow
the settlement of payments
‹
‹
‹
But how should central banks react if participants have
problems in settling payments in a way that the central
bank feels comfortable with?
‹
‹
if the participants do not have adequate financial means to do so (i.e.
central bank money)
and – in worst case - if this would put their own credit standing at risk.
IIn particular
ti l if participants
ti i
t cannott obtain
bt i sufficient
ffi i t amountt off
central bank money without incurring excessive (opportunity)
costs
This is background for this presentation
‹
After having been digested by an payment system overseer
26 August 2008
DANMARKS NATIONALBANK
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The rationale behind the paper
‹
Alternative measures available to improve participants’
liquidity position when settling payments in the central
bank:
‹
Improve the payment systems’ efficiency by introducing liquidity
g measures
saving
I.e. implementing “hybrid-features” in central bank’s RTGS-system
A topic for research in many years
‹
‹
‹
Allow foreign assets as collateral when granting intraday credit
A solution some central banks has chosen already or consider right
now!
Not a topic in this presentation (Bank of England has published
research on this topic)
‹
‹
‹
Influence participants behaviour
E g by setting fees that increase (penalise?) participants’
E.g.
participants delay costs
relative to liquidity costs
In some systems this is already done by having a fee structure where
transaction fees increase during opening hours (low in the morning,
high in the afternoon)
This presentation provide the overseer with insights on how to start
assessing possible ways to influence participants behaviour
‹
‹
‹
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A Danish perspective
Apparently, participants in Danmarks Nationalbank’s RTGS system have
ample liquidity as their utilisation of disposable amounts for settlement of
payments is rather limited, but this is only part of the story …
Per cent
100
90
80
70
60
50
40
30
20
10
0
0-10
per cent
>10-20
per cent
>20-30
per cent
>30-40
per cent
>40-50
per cent
>50-60
per cent
>60-70
per cent
>70-80
per cent
>80-90
per cent
>90-100
per cent
Payment s as a percent age of disposable amount f or set t lement
2005
Note:
Source
:
2006
2007
In the compilation payments have been weighted by size. Payments of less than Kr. 1 million have been excluded.
Danmarks Nationalbank.
26 August 2008
DANMARKS NATIONALBANK
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2
A Danish perspective
… because the picture wouldn’t be so rosy if it wasn’t for the fact that
the participants in Kronos have chosen to submit payments in a way
that are rather coordinated …
… But will it stay so forever? We don’t know?
Per cent
100
80
60
40
20
0
7:00
7:30
2005
Note:
Source:
8:00
8:30
2006
9:00
9:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 15:00
Time
2007
Accumulation of interbank payments over Kronos' opening hours (7:00 a.m. to 3:30 p.m.).
Danmarks Nationalbank.
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DANMARKS NATIONALBANK
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Last comments
‹
Highly relevant presentation:
‹
Shows that central banks can gain much from
influencing participants
participants’ behaviour with regard to
ensuring safe and efficient settlement of payments
‹
‹
‹
Could be a cheaper solution than start on building a new
state-of-the art LVPS with fancy LSMs, etc. (which the central
banks cannot even be sure would remedy the settlement
process)
Proceeding this way could perhaps even be a way to reduce
costs (and the subsidizing of payment settlement which take
place) in many central banks
A final version of your paper would benefit from
inclusion of a “Guide for (non-technical) overseers”
‹
But anyway, your line of thought gives valuable insights which
overseers cannot easily get if they only read the Core
Principles report from 2001.
26 August 2008
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