In earlier times, societies relied extensively on "IOUs" ("I owe you") to avert the need for settlement in specie. However, an IOU reliant economy is complex and fraught with financial stability risks. These problems can be overcome through clearing, netting and settlement, either without or...

The holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium. The search for such a solution is as old as international commerce and the implied need to pay. This paper describes current visions...

National Central Banks (NCBs) of the Eurosystem pool profits and losses related to monetary policy operations to form the Eurosystem's so-called 'monetary income'. This is then redistributed - i.e. allocated - among NCBs according to respective capital keys (the participation shares of each NCB...

As digital payments become increasingly popular, many central banks are looking into the issuance of retail central bank digital currency (CBDC) as a new central bank monetary liability in addition to banknotes and commercial bank reserves. CBDC will have broadly the same balance sheet and...

Over the last decades, macro-economists have renewed their efforts to reduce the gap between monetary macroeconomics and real-world central banking. This paper reviews how macroeconomics has since 2016 approached the possible introduction of retail central bank digital currencies (CBDC). A...

TARGET2 and the European Sovereign Debt Crisis The TARGET2 (T2) positions on the balance sheets of euro area national central banks (NCBs) have increased unprecedentedly since the beginning of the financial crisis. Currently only four euro area NCBs record T2 claims, while the remaining NCBs are...

In a dual liquidity crisis, both the government and the banking sector are under severe funding stress. By nature, dual crises have the potential of being particularly disruptive and damaging. Thus, understanding their mechanics, how they unfold and how they can be addressed under various...

Repo auctions are used to inject central bank funds against collateral into the banking sector. The ECB uses standard discriminatory auctions and hundreds of banks participate. The amount auctioned over the monthly reserve maintenance period is in principle exactly what banks collectively need...

Elemente einer Theorie der Liquiditätssteuerung von Notenbanken Die "Liquiditätssteuerung" einer Notenbank wird definiert als der Rahmen, die Instrumente und Regeln, die die Notenbank zur Steuerung des Angebots an Bankreserven, und damit zur Steuerung von deren Preis (d.h. insb. des...

Rapid and large deposit outflows from banks have regained attention in the context of the March 2023 demises of Credit Suisse, SVB and other regional US banks. Moreover, the possible introduction of CBDC or a marked success of stablecoins are perceived as additional clouds over the future of...