Interlinkages between payment and securities settlement systems

摘要

Pay merits systems involve a number of interconnected systems that center around a large-value payment system through which banks send funds to each other for various purposes. Of fundamental interest to central banks are the interlinkages among these types of systems. This paper builds on Mills and Nesmith (J Monet Econ 55:542-553, 2008) to construct a relatively simple economic framework to begin to understand some of the different linkages of such systems with particular emphasis on the impact various disruptions may have. It looks at three alternative arrangements through which a funds transfer system and securities settlement system are linked. Each arrangement differs by the way the securities settlement system is designed. The main finding is that, although the different arrangements have different possible implications during a settlement shock ex ante, the equilibrium behavior of banks leads to the arrangements having similar implications ex post.