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Risk management and public policy in clearing, payment and settlement systems

Risk management and public policy in clearing, payment and settlement systems
Risk management and public policy in clearing, payment and settlement systems
In recent years regulators have been increasingly focusing their attention on payment, clearing and settlement systems on the grounds that any serious disruption to the settlement process could have widespread sys-temic consequences. These concerns embrace wholesale interbank payment systems, foreign-exchange settlement, securities settlement and derivatives clearing houses. There is, however, a dilemma for regulators insofar as their active involvement in the settlement process can lead to market expectations of official support in the event of any threatened disruption.
This paper explains the nature of settlement risk in interbank payments as well as foreign exchange, securities and derivatives markets; describes recent regulatory initiatives in these areas; and assesses the financial market's approach to handling settlement risks. The conclusion is that the market has been most effective in controlling settlement exposures in those areas where systemic risk – and therefore central bank involvement – is least evident.
1367-0271
229-259
Dale, Richard
b637fb4c-899e-4bec-82a4-0b2ca795f7c7
Dale, Richard
b637fb4c-899e-4bec-82a4-0b2ca795f7c7

Dale, Richard (1998) Risk management and public policy in clearing, payment and settlement systems. International Finance, 1 (2), 229-259. (doi:10.1111/1468-2362.00011).

Record type: Article

Abstract

In recent years regulators have been increasingly focusing their attention on payment, clearing and settlement systems on the grounds that any serious disruption to the settlement process could have widespread sys-temic consequences. These concerns embrace wholesale interbank payment systems, foreign-exchange settlement, securities settlement and derivatives clearing houses. There is, however, a dilemma for regulators insofar as their active involvement in the settlement process can lead to market expectations of official support in the event of any threatened disruption.
This paper explains the nature of settlement risk in interbank payments as well as foreign exchange, securities and derivatives markets; describes recent regulatory initiatives in these areas; and assesses the financial market's approach to handling settlement risks. The conclusion is that the market has been most effective in controlling settlement exposures in those areas where systemic risk – and therefore central bank involvement – is least evident.

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Published date: December 1998

Identifiers

Local EPrints ID: 64674
URI: http://eprints.soton.ac.uk/id/eprint/64674
ISSN: 1367-0271
PURE UUID: 7ee973d7-d670-4871-9e39-eb322e9533e0

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Date deposited: 21 Jan 2009
Last modified: 15 Mar 2024 12:01

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Author: Richard Dale

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