text: bilateral basisoutside theambitofthecurrent rules. CHESSdefinesits unwindprocedures asadministrative aidstoassistsurvlvlnginstitutions with claims. 25.Although settlement inCashWire isnormally carried outonthebasisof e3chbank'snet-net debitorcreditbalance foritsentireday'stransactions through CashWire, incaseanybankfailstosettle. therestofthesettlementA/CN.9/266/Add.1 English Page34 iscarried outbypairsofbankson anetsettlement basis. Therefore, each bankcarries theriskthatitwillnotreceive reimbursement forthenet amountofcredittransfer instructions ithasreceived fromanother bank through CashWire thatdayinexcessofthecredittransfer instructions ithas senttothatbank. (iii)Private network finality rules 26.CHIPStransfers arefinalwhenreleased tothereeeiving bankinthatthe sending bankmaynotwithdraw thecredittransfer instruction. However, since thereisapossibility thatreceiving bankswillnotreceive settlement for transfers through CHIPS.theyarenotobligated tohonour fundstransfer instructions ortogiveirrevocable credittotransferees orothercredit parties untilsettlement isfinal.- 21.CHESSandCashWire transfers arefinalastobothsending andreceIVIng bankswhenreceived bythelatter. Thesending bankmaynotwithdraw the credittransfer instruction. (c)Methods considered toreducesystem-risk 28.TheAmerican banking community hasbeenconcerned withlimiting the systemic riskarising outoftherecentincrease inbankfailures. Inrespect ofthepossibility ofafailure tosettle. on 29 March 1984 theBoardof Governors oftheFederal Reserve Systemrequested comments on various proposals toreducesystemriskinhigh-value fundstransfer networks. Over twohundred comments werereceived. Theprincipal methods toreducesystem risksuggested bytheFederal Reserve orbyrespondents aresetoutinthe following paragraphs. (i)Bilateral netcreditlimits• 29.Underthismethod eachbankwoulddetermine themaximum amountofthenet intra-day credititiswilling toextendtoanyotherbankarising outof fundstransfers through thenetwork. Suchalimitwouldbeflexible. with eachbankadjusting thenetcreditlimititwouldextendtootherbanks ~ depending onconsiderations relating totheeconomy ingeneral. toperceptions oftheotherbank'scurrent fin~ncial position ortomeetimmediate business needs. Sinceabankwhichcarried areasonable balance witheachofalarge numberofotherbanksmighthaveacombined debitbalance beyonditsmeans. thismethodmighthavelittlelikelihood ofreducing theriskofabank failing tosettle. However by limiting theeffectofafailure tosettleon anyotherparticular bank.t.hisbilateral netcreditlimitsmayreducethe risktothesystem. 30.Eachofthethreeprivate large-value networks hasarequirement thatthe participating bankshavebilateral netcreditlimitsforeachoftheother participating banksforfundstransfers madethrough thatnetwork. These limitsaremonitored onareal--time basisbythenetwork computers. Ifan individual bankwishestohaveabilateral creditlimitforanother bank applicable acrossallsystems. ithastomonitor thesituation itself.{ •• •A/CN.9/266/Add.l English Page35 31.Bilateral netcreditlimitsarenotapplicable assuchtoFedwire or private correspondent banking relationships. However, thesameresultis achieved bylimitsontheintra-day debitbalance anybankispermitted to carrywiththeFederal Reserve Bankorwiththeprivate correspondent bank. (ii)Sendernet-debit cap 32.Asendernetdebitcaplimitstheextenttowhichabankcansendcredit transfer instructions toallotherbanksbeyondtheamountitreceives from them.Sendernet-debit capsof50percentofcapital arecurrently ineffect inCashWire. CHIPSisactively considering capsbasedon apercentage ofthe totalbilateral creditlimitsestablished forabankbyallother participating banksindividually. 33.Byrestricting theextenttowhichabankcansendcredittransfer instructions beyondtheamountreceived, andapplying therestriction continuously throughout theday,thelikelihood thatthebankwillfailto settleaswellastheconsequences ofsuchafailure arereduced. However, if sendernet-debit capsareapplied separately toeachofthethreeprivate networks, ithasbeenthought thatthetotalnetamount a bankcouldsend mightbetoohigh. Analternative, therefore, wouldbe asinglesender net-debit capapplicable toallnetworks combined. 34. ~fuiletheusefulness ofsendernet-debit capstoreduceriskseemsclear, itisfearedthatoneadverse effectcouldbetointerfere withthefunds
analysis: This text appears to be discussing the financial and banking systems, specifically the settlement and transfer of funds between banks, and the measures being taken to reduce the risk of bank failures. It seems to be focused on the internal workings of the financial industry and the ways in which banks interact with each other.