Does SIC need a heart pacemaker?

Dr. Robert Oleschak and Dr. Thomas Nellen

Issue
2013-10

Pages
41

JEL classification
C63, E42, G18

Keywords
payment system, simulation, payment splitting, liquidity-saving mechanisms

Year
2013

Real-time gross settlement (RTGS) systems effect final settlement of payments continuously and on an individual basis. This generates a trade-off between liquidity needs and settlement delay. Against the background of reconstruction discussions, the paper analyses whether more advanced algorithms reduce liquidity needs and settlement delay if applied to the Swiss Interbank Clearing (SIC) system. Simulations run with the BoF-PSS2 simulator show that expected reductions in liquidity needs and settlement delay are modest and should carefully be evaluated against costs. More advanced settlement algorithms improve settlement efficiency only if payment release behaviour is highly aligned.