Central Banking

RBA paper addresses systemic risk in payments system


A Reserve Bank of Australia research discussion paper, published on September 5, finds liquidity-saving algorithms are the most effective moderators of systemic risk in the real-time gross settlement (RTGS) payments system.

The efficient recycling of liquidity is crucial for payment systems that settle on a RTGS basis, the paper says. If a participant is prevented from settling a payment it can lead to a systemic risk as they are left with a 'liquidity sink', which can prevent other participants

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