Clearing and Payment Systems: The Role of the Central Bank

    This paper has three main parts. First, to provide a common frame of reference, I develop a model of the payment system, with special reference to the essential role of the central bank.Second, I discuss the implications of the public policy and supervisory roles of the central bank in the payment system. These implications include(1) the need to establish public policies to guide the structure of newly developing private clearing and settlement arrangements, in terms of both their integrity and efficiency, and (2) the need for supervision of private clearing arrangements,not only domestically, but also for crossborder systems, in close cooperation with foreign central banks. Finally, I examine the role of the central bank as operator of a large-value, interbank payment mechanism. Special attention is given to the implications of the central bank's
    role as a source of intraday liquidity to the financial system and to the "safety net" attributes associated with access to a large-value transfer mechanism.