47
The current end-of-day arrangements are too complicated. The Bank wants to simplify them, whether the maintenance requirement is same-day or a period-average.
48
In a same-day system, the Bank would require scheme banks to balance their accounts (i.e. to have a minimum balance of zero or to meet any pre-set positive reserve balance) by the end of the day [=the square off for a Central Bank]. Likewise, in a period-average system, on the final day of the maintenance period, scheme banks would be required to hold whatever balance was needed to achieve the agreed period-average and, every day, banks would need to ensure that their account at the Bank was not overdrawn. 49
The Bank [=the CENTRAL BANK of UK] expects [other/commercial] banks to manage their liquidity, and square off expected end-of-day positions, actively during the trading day. As described above, it is proposing to give banks the option – probably throughout the day – to cover any expected deficit via the standing (collateralised) lending facility and to place any expected surplus in the standing deposit facility. Any excess reserves at the end of the maintenance period will be non-interest bearing. Overdrafts or shortfalls in reserve balances will be charged a significantly higher interest rate than available in the standing lending facility in order to create incentives for banks to manage their liquidity in a controlled way when markets are open.
....
51
Which (if any) of the above (or other) approaches would banks prefer and why?
52
With a much narrower trading range for overnight rates and more widely available standing facilities at less penal rates than now, the Bank believes that there would probably be less need for any special end-of-day arrangements for banks that are direct members of the payments system to square off amongst themselves. It would therefore like to hear views on whether or not the current End-of-Day Transfer Scheme for settlement banks should be discontinued

http://www.bankofengland.co.uk/markets/Documents/money/smmre... see page 13