search query: @author Kahn, C. M. / total: 4
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Author: | Kahn, C. M. Roberds, W. |
Title: | Payment system settlement and bank incentives |
Journal: | Review of Financial Studies
1998 : WINTER, VOL. 11:4, p. 845-870 |
Index terms: | PAYMENT SYSTEMS BANKS INCENTIVES |
Language: | eng |
Abstract: | This paper considers the relative merits of net versus gross settlement of interbank payments. Net settlement economises on the costs of holding non-interest-bearing reserves but increases moral hazard problems. The put option value of default under net settlement may also distort banks investment incentives. Absent these distortions net settlement dominates gross, although the optimal net settlement scheme may involve a positive probability of default. |
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