Over the last few decades, most central banks, concerned about settlement risks inherent in payment netting systems, have implemented real-time gross settlement (RTGS) systems. Although RTGS systems can significantly reduce settlement risk, they require greater liquidity to smooth...

A recent innovation in large-value payments systems has been the design and implementation of liquidity-saving mechanisms (LSMs), tools used in conjunction with real-time gross settlement (RTGS) systems. LSMs give system participants, such as banks, an option not offered by RTGS alone: they can...

We provide a summary and an overview of the papers presented at the Federal Reserve Bank of Cleveland’s 2004 Workshop on Money, Banking, and Payments, held during the weeks of August 3-7 and August 23-27, 2004.

I explore alternative central bank policies for liquidity provision in a model of payments. I use a mechanism design approach so that agents' incentives to default are explicit and contingent on the credit policy designed. In the first policy, the central bank invests in costly enforcement and...

The use of electronic payment methods has increased rapidly over the last decade. Recent studies shed greater light on the forms these payments are taking — and why checks still serve a vital function for certain transactions.

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...

This is a transcript of a speech delivered May 4 in Santa Fe, N.M., at the Bank's conference "Nonbanks in the Payments System: Innovation, Competition and Risk"

This paper considers the welfare effect of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planner's problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planner's allocation...