INTRADAY LIQUIDITY MANAGEMENT: A TALE OF GAMES BANKS PLAY by ProQuest

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									Morten L. Bech




Intraday Liquidity
Management:
A Tale of Games Banks Play
• To ensure smooth operation of real-time                                          1. Introduction
   gross settlement systems, central banks
   extend intraday credit, either against                                            “[Banks] like to hang on to their cash and deliver it
   collateral or for a fee.                                                          as late as possible at the end of the working day.”
                                                                                     “The Long Shadow of Herstatt,” The Economist,
• As intraday credit is costly—either explicitly                                     April 14, 2001
   as fees or implicitly as the opportunity cost
   of collateral—participating banks seek to                                    The value and volume of interbank payments increased
                                                                                dramatically throughout the 1980s and 1990s as a result of rapid
   minimize their use of liquidity by timing the
                                                                              
								
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