How Has the Liquidity Saving Mechanism Reduced Banks’ Intraday Liquidity Costs in CHAPS?
10 Pages Posted: 10 Jul 2014
Date Written: June 16, 2014
Abstract
Banks require intraday liquidity to settle payments in CHAPS, the United Kingdom’s high-value sterling payment system. In April 2013, the Bank of England introduced a Liquidity Saving Mechanism (LSM) into the infrastructure used to settle CHAPS payments. The LSM has reduced CHAPS banks’ intraday liquidity requirements by around 20% (or £4 billion). The LSM has reduced incentives for banks to adopt adverse behaviours to economise on their intraday liquidity requirements, thus enhancing the resilience and efficiency of CHAPS.
Suggested Citation: Suggested Citation
Davey, Nick and Gray, Daniel, How Has the Liquidity Saving Mechanism Reduced Banks’ Intraday Liquidity Costs in CHAPS? (June 16, 2014). Bank of England Quarterly Bulletin 2014 Q2, Available at SSRN: https://ssrn.com/abstract=2464096
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.