Managing Payment System Risk During the Transition From a Centrally Planned to a Market Economy

IMF Working Papers, November 1, 1992

Source details

Canonical URL: Managing Payment System Risk During the Transition From a Centrally Planned to a Market Economy

The objectives and functions of payments systems in centrally planned economies are described and analyzed.
These objectives and functions are compared to:
- those of payments systems in market economies, and
- the characteristics of an ideal payments system.
In centrally planned economies the dominant role of the state meant that the state underwrote virtually all payments risk.
With the withdrawal of the state, participants become exposed to credit, liquidity, and operational risks.

Credit risk arising from the removal of state underwriting.
Liquidity risk as market-based settlement replaces state-controlled arrangements.
Operational risk linked to new payment processes, institutions, and procedures.

In the transition, the central bank has a key role to play in payments systems.
Central bank responsibilities implied by the analysis include oversight and facilitation of safer clearing and settlement arrangements (as described in the source text).

Subject: Banking, Commercial banks, Credit, Credit risk, Economic sectors, Financial institutions, Financial markets, Financial regulation and supervision, Financial sector, Money, Payment systems
Keywords: clearing house, Commercial banks, Credit, Credit risk, Financial sector, managing payment risk, payment advice, payment anomaly, payment habit, payment information, payment instruction, payment obligation, Payment systems, payment transaction, payments area, payments policy, payments regulation, payments transmission, state bank, WP