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Economic Review

Nov/Dec, 1988

SIC: Switzerland's New Electronic Interbank Payment System

David L. Mengle and Christian Vital

It is an article of faith among American bankers and their regulators that some daylight overdrafts are necessary to the efficient functioning of large-dollar wire transfer systems. But the Swiss have injected an element of doubt by developing a system that does away with daylight overdrafts. Their new system processes a payment only if sufficient clearing funds are on deposit in the sending bank's reserve account. If sufficient funds are not available, the payment is held in a queue until covering funds have arrived. Vital and Mengle describe the first eighteen months of the system's operation.

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