Despite the crucial role that intraday credit plays in enabling the smooth functioning of global payments, clearing and settlement systems (encompassing securities and derivatives), historically these flows were below the radar of regulatory supervision.
The main reason was because of the typically unadvised and uncommitted – and therefore unreported – nature of this category of credit. It does not appear on a bank’s balance sheet, as usually the liquidity underpinning these credit lines is released in the morning and squared off by the day’s end. But by virtue of being unadvised and uncommitted, these intraday credit lines between users and correspondent banking providers could theoretically be withdrawn any time, at the provider’s discretion.
