Marius Jurgilas Home Page

 Office address:
Bank of England
Threadneedle Street, London
EC2R 8AH

Completed papers:

• Liquidity-saving mechanisms in collateral-based RTGS payment systems
   

• Collateral pool settlement system
   

• Monetary Policy Under a Currency Board
   

• Interbank Markets Under Currency Boards
   

• Financial Dollarization: The Role of Banks and Interest Rates
   

• Corruption and Growth Under Weak Identification
   

• Interbank Market Under the Currency Board: Case of Lithuania

Abstract

This paper investigates a collateral pool settlement (CPS) payment system – a system that provides intra-day liquidity against a collateral pool. First, we show that participants of CPS do not have incentives to delay payments once they have committed to participate. This is in striking contrast to a Real Time Gross Settlement (RTGS) system where banks have strong incentives to free-ride on liquidity provided by incoming payments. Second, we establish conditions under which banks prefer to participate in a collateral pool instead of settling payments in RTGS. Third, we show that a late payment equilibrium may arise in RTGS in the presence of a possible intra-day failure of a participant if the cost of intra-day liquidity is sufficiently high.

-- Vini design, 2006 --
17-Aug-2010