This paper studies the pricing of large-value payment systems and its influence on the way commercial banks route their payments. It is shown that the optimal pricing scheme for a public monopoly system involves quantity discounts in the form of a decreasing marginal fee. This is also true when...

Systemic risk refers to the propagation of a bank's economic distress to other economic agents linked to that bank through financial transactions. Banking authorities often prevent systemic risk through an implicit insurance of interbank claims, or by reducing interbank transactions and...

We model systemic risk in an interbank market. Banks face liquidity needs as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks while reducing the cost of maintaining reserves. However, the interbank market exposes the...