The International Clearing Union proposed by Keynes at Bretton Woods was designed not only to avoid using a national currency as an international means of payment and reserve asset, but also to provide a source of funding for temporary balance of trade disequilibria. Moreover, the proposal for collective commodity management would have provided liquidity to the international currency, by ensuring its convertibility in a basket of foodstuffs and raw materials. The ICU proposal was unsuccessful, but experienced a successfull regional application in Europe in the 1950s with the European Payments Union. Since the early 1960s, the regional EPU solution has attracted interest outside Europe.Today, as emerging economies show a growing political interest in reducing their dependence on the US dollar, the issue of regional clearing regains attention. The twin objectives of supporting regional trade growth and reducing exchange rate risk against the dollar are driving solutions based on multilateral payment technologies. The paper discusses the theoretical underpinnings of Keynes’s Clearing Union proposal; illustrates their regional application EPU; analyses various regional payments systems that are currently being proposed or implemented, investigating how they may reduce reliance on the US dollar as a means for international settlement and how they may be understood (and perhaps further enhanced) in the light of the principles of multilateral clearing.

The cross holding of interbank deposits represents an optimal ex-ante co-insurance arrangement whenever the uncertainty concerning banks’ liquidity needs is idiosyncratic and imperfectly correlated. When a shock to aggregate liquidity demand occurs, however, such an arrangement could be detrimental – depending on the topological structure of interlinkages – as financial exposures become a means to spread risk. If the ex-post facto is an excess demand for liquidity, therefore, regulators could severe potential channels of contagion by forcing banks to net their mutual debt obligations. Starting from these premises we employ simulation techniques with simple interbank structures to obtain two results. First, a state-contingent mandatory policy to bilaterally net mutual interbank exposures comes with a trade-off between the benefits of thwarting the channels of contagion and the harms of a greater concentration of the remaining netted expositions. Second, the balance between the two prongs of the trade-off depends on the metric used by regulators to define financial stability and the topological structure characterizing the interbank market.

This paper analyses the potential of a European Debt Agency (EDA) as an efficient debt management institution for the Euro area. The simulation of prices and quantities that would have been observed in a scenario with an operational EDA illustrates that there have been fluctuations in bond prices that EDA would have been able to prevent. Moreover, due to the less volatile price dynamics, EDA would have been capable to absorb the entire eurozone debt while reducing its size. This evidence speaks in favour of EDA as an institutional debt management tool for hedging Member States financing from market sentiment vagaries; creating a European Safe Asset; unburdening ECB from debt management and managing efficiently the implementation of fiscal rules.