AN ECONOMIC PERSPECTIVE ON THE ENFORCEMENT OF CREDIT ARRANGEMENTS: THE CASE OF DAYLIGHT OVERDRAFTS IN FEDWIRE.

The article discusses the dealing of Federal Reserve's Fedwire to credit risk exposure to daylight overdrafts. Accordingly, extending daylight overdrafts by Federal Reserve expose central bank to credit risk, risk for lenders that borrower neglects to repay loan. Moreover, Federal Reserve manages the exposure by combining the tools of monitoring, bank reputation awareness, and collateral demands. The ways to lessen risk by the central bank's effective enforcement technologies is presented.