THE TIMING AND FUNDING OF CHAPS STERLING PAYMENTS by ProQuest

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									Christopher Becher, Marco Galbiati, and Merxe Tudela




The Timing and Funding
of CHAPS Sterling Payments

• Participants in CHAPS Sterling often use                                       1. Introduction
  incoming funds to make payments, a process
  known as liquidity recycling.

• Liquidity recycling can be problematic if
                                                                              T     he use of real-time gross settlement (RTGS) systems for
                                                                                    the settlement of large-value payments offers considerable
                                                                              advantages, the principal one being the elimination of the credit
  participants delay their outgoing payments in                               risk that can arise between participants in deferred net settle-
  anticipation of incoming funds.                                             ment systems. However, in comparison with deferred net
                                                                              settlement systems, RTGS systems require relatively large
                                                                              amounts of liquidity to support payment activity. This liquidity
• An analysis of CHAPS payment
								
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