Carol Ann Northcott - Bank Publications
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Competition in Banking: A Review of the Literature
The author reviews the theoretical and empirical literature to examine the traditional perception that the following trade-off exists between economic efficiency and stability in the banking system: a competitive banking system is more efficient and therefore important to growth, but market power is necessary for stability in the banking system. -
December 23, 2002
Systemic Risk, Designation, and the ACSS
This report discusses the decision not to designate the Automated Clearing Settlement System as a systemically important system, as well as some of the research contributing to that decision. -
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Estimating Settlement Risk and the Potential for Contagion in Canada's Automated Clearing Settlement System
Payments systems operate virtually unnoticed in our daily lives and yet are crucial to a wellfunctioning economy and financial system. -
November 20, 2002
CLS Bank: Managing Foreign Exchange Settlement Risk
In the foreign exchange market, where average daily turnover is in trillions of dollars and trades span time zones, legal systems, and domestic payments systems, participants take on various risks. The most serious risk is credit risk—the risk that one party will fail to pay. Central banks, private sector financial institutions, and domestic payments systems operators laboured for more than a decade to develop a multi-currency settlement system to deal with these risks. The result, the CLS Bank, began operations in September 2002. It virtually eliminates the credit risk inherent in foreign exchange transactions by providing a payment-versus-payment arrangement for settlement. The CLS Bank is regulated by the Federal Reserve Board in consultation with the central banks that have currencies settling through its system. At present there are seven currencies, including the Canadian dollar. The Bank of Canada acts as banker for the CLS Bank, providing it with a settlement account and making and receiving payments on its behalf through the Large Value Transfer System. With the participation and support of the world's largest foreign-exchange-dealing institutions, and growing membership, the CLS Bank has the potential to become the dominant global mechanism for settling foreign exchange transactions.