U.S. check history and structure from 1984 to 2008

Abstract

The tesina deals with the increase in the liquidity risk of the bank industry from the 1980s to the year 2008. The tesina suggests that bank clients prefer to use electronic payments to the use of the check—that it is a type of liquid payment—: banks have kept their liquid reserves relatively stable, while the number of real deposits has increased over time. The tesina explains that banks have invested in technological capacity to cut the check transit float time and the transit float time of receiving payments owed by the depository institutions issuing checks to the receiving banks of them: as the bank industry of U.S. is concentrated in a few banks, the technological disparity of banks—that is, the transit float times, both to collect checks and to receive their payment, are not equal between banks— raises the risks of a bank panic in the industry at the moment in which people change their preferences to use of electronic payment systems by liquid payment systems. The above derives from the dissonance between two variables of the bank industry: the size of the deposits, which can be directly controlled by the banks and the liquidity preferences of the customers of the banks—such as the use of the check as a payment system—, which is exogenous and is not directly controlled by banks.