Payment Systems

Public policy responsibility for the payment system usually rests with central banks. Central banks are naturally interested in the payment system because it is a key component of the operation of financial markets and has important implications for the trading efficiency of the real economy. Of particular concern to central banks is clearing and settlement in financial markets where trading results in large payment obligations, such as the securities, commodity, interbank funds, and foreign exchange markets.

The central bank also participates in the payment system as a provider of interbank payment services. The role of the central bank in operating the interbank system depends on the development of a nation’s payment system.

The Central Bank of Russia, with the assistance of international experts, has taken steps to raft legislation and oversee the decentralized expansion of Russia’s domestic payment system. Progress has included improvements in the Interbank Payments System, involving the use of computer-generated instructions with specialized software. An electronic payments system for cash settlement was installed in Moscow, where 65 per cent of total document urnover in Russia occurs. The so-called automatic payments system began with eight banks in September 1993. As of July 1994, about 60banks and two cash settlement centers (all in the Moscow area) participating in the automatic payments system. Eventually, all banks will be part of this system. Efficiency at other cash settlement centers was improved, and growth was recorded in the number of both interbank settlement centers and networks of banks with cross-connecting correspondent accounts that act as settlements agents for associated groups of smaller banks.

Words you may need:

rest – покладати (про зобов’язання)

software – комп’ютерне програмне забезпечення

document turnover – документообіг

cash settlement center – розрахунково-касовий центр

cross-connecting correspondent accounts – перехресні кореспондетнські рахунки

 Tests:

I. For each word or sentence choose the correct definition:

1. The central bank in Ukraine is called:

1. Federal Reserve Board;

2. Bundesbank;

3. National Bank

2. The board of governors of the Fed has its headquarters:

1. in Washington D.C.;

2. in New York;

3. in Chicago

3. The Fed consists of:

1. twelve federal reserve banks;

2. eleven reserve banks;

3. twelve reserve banks and a board of governors

4. The banking system in Ukraine is organized as:

2. 1-tier system;

3. 2-tier system;

4. 3-tier system

5. The National Bank pays:

2. tax on profit;

3. tax on property;

4. charges to the Pension Fund;

5. it is exempt from taxes

II.Match what statements are true and what are false. Results write to the table:

1. The central banking system plays a very important role in the fiscal policy of national government.

2. Central banks act as lenders of last resort to commercial banks with liquidity problems.

3. The Federal Reserve System, is known as an independent agency of Congress of Russia.

4. Check clearing means that check written on one bank can not be accepted at any other bank.

5. The main reason for setting up the Fed was preventing of the banking panics.

6. Refinancing of commercial banks is one of the main instruments of the national bank of Ukraine.

Table

	1	2	3	4	5	6
True
False

III. Fill the tables:

a )

 Unit 5