Collateralization of intraday liquidity in a real-time gross settlement system: An analysis of commercial banks' behavior

This article deals with commercial banks' behavior in a real-time gross settlement system where intraday liquidity is collateralized by securities. In the first part, we examine the principle of collateralization and its benefits as a means of reducing liquidity and credit risks when financial transactions are settled. In the second part, we analyze theoretically the consequences of securization on banks' behavior. In a model a la Angelini [1998], we show that Cournot-Nash equilibrium, where banks prefer to delay their payments rather than to constitute sufficient excess reserves, is sub-optimal. The objective of reducing settlement risks following the implementation of gross settlement systems may not be attained. Classification JEL : G21, G28.