Towards Decreasing the Associated Risks with Payment Settlement Systems

Firas Mohammad Issa; Mohammad Ahmad; Jamal Alyaseen; Mohyeldin Mourad

doi:10.15866/irecos.v9i10.4105

Towards Decreasing the Associated Risks with Payment Settlement Systems

Firas Mohammad Issa^(1*), Mohammad Ahmad⁽²⁾, Jamal Alyaseen⁽³⁾, Mohyeldin Mourad⁽⁴⁾

^(*) Corresponding author

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DOI: https://doi.org/10.15866/irecos.v9i10.4105

Abstract

Due to the importance of settlement payments systems and its impacts on the banking sector, and the fact that a perfect settlement system has still not been found, it stays a challenging in payment systems research. This paper presents a framework to decrease the associated risks with two dominated settlement systems, Namely, 1- Deferred Net Systems which depend on principle of payments offset among banks during the working day, the settlement is executed only at the end of the day.2-Real time gross settlement system, in this type of systems, the settlement process is done individually and continually. This study is considered very valuable because it shows an approach that takes advantages of two mentioned systems, avoiding the credit and operational risks throw the settlement within intervals, it may reduce the liquidity volume and gridlock phenomenon by using proactive approach for these problems. And provide indicators at the participant bank level individually and at the system level giving ability to the system administration and participating banks to take proactive steps for reducing those risks.
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Keywords

Settlement; Offset; Real Time Systems; Queue; Circular Queue

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