Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/243289
Authors: 
Hellqvist, Matti
Korpinen, Kasperi
Year of Publication: 
2021
Series/Report no.: 
BoF Economics Review No. 7/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
The amount of central bank money, or liquidity, needed to settle payments, depends on the way the settlement is organized. It is largest when payments are settled individually on gross basis and smallest with settlement in one big netting cycle. Retail payments are increasingly processed in instant payment schemes and systems. We evaluate how the result of this transition affects the liquidity needs of the Finnish banks. For the analysis we generate artificial transaction level data, which mimics the Finnish retail payment flows processed in the STEP2 system. This allows us to estimate the difference between the liquidity needs for the settlement in a cycle based model and in a full instant payment mode. We also present a regression model for the bank level additional liquidity needs. A full migration to instant payments is expected to cause only a small aggregate increase in the liquidity needs. However, the variations between banks or between days can be significant and emphasize the need of liquidity buffers.
Subjects: 
instant payments
liquidity needs
payment systems
netting
Persistent Identifier of the first edition: 
Document Type: 
Research Report

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.