Final answer:
The advantage of the clearinghouse system relative to a bilateral system of bank payments is that clearinghouses do not permit negative balances intraday, as this is a standard operational feature, not an advantage.The correct option is: d) In a bilateral system, the failure of one bank to settle with its correspondents can have a ripple effect by making it impossible for the other bank to settle.
Step-by-step explanation:
The question asks which of the following is not an advantage of the clearinghouse system relative to a bilateral system of bank payments. The advantage of the clearinghouse system is that it reduces the systemic risk in the financial system by guaranteeing payments and allowing the netting of transactions, thus preventing the cascading failure of banks.
In contrast, a bilateral system is susceptible to a ripple effect, where the failure of one bank can impact others. To address the options given: a) Clearinghouses typically monitor balances and may not permit negative balances intraday; b) During crises, clearinghouses could potentially create additional reserves; c) Payments are indeed guaranteed by all clearinghouse members, an essential feature for stability; d) The ripple effect described is a disadvantage of a bilateral system that clearinghouses try to mitigate; and e) Netting of payments across various correspondents is a key function of clearinghouses, not a differentiating advantage over them.
Thus, the answer is option a), as it does not represent an advantage of clearinghouse systems; it's a regular feature of how they manage risk.