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January/February 1989, 
Vol. 71, No. 1
Posted 1989-01-01

Payments System Risk: What Is It and What Will Happen If We Try To Reduce It

R. Alton Gilbert uses simple balance sheet entries to describe how payments affect risk. He also examines the likely effects of possible actions to reduce payments system risk. Among the actions considered are charging fees on the daylight overdrafts of banks’ reserve accounts at Federal Reserve banks and requiring banks that overdraw their reserve accounts to hold additional reserve balances. The illustrations also consider the operation of CHIPS—the private system for electronic payments—under a procedure that ensures the execution of payments messages processed by that system.