The network topology of CHAPS Sterling

Christopher Becher (), Stephen Millard () and Soramäki, Kimmo ()
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Christopher Becher: Bank of England, Postal: Bank of England Threadneedle Street London EC2R 8AH
Stephen Millard: Bank of England, Postal: Bank of England Threadneedle Street London EC2R 8AH
Soramäki, Kimmo: Bank of England, Postal: Bank of England Threadneedle Street London EC2R 8AH
Authors registered in the RePEc Author Service: Kimmo Soramäki ()

No 355, Bank of England working papers from Bank of England

Abstract: In this paper, we seek to understand the network topology of large-value interbank payment flows in the United Kingdom so as to understand better the risks associated with the system. We first examined the broad network topology of interbank payments in the United Kingdom. We found that, despite the fact that there are far fewer banks in the United Kingdom than in the United States, the structure of UK interbank payments is similar in certain respects to that of the United States, but that the tiered structure of the UK system implies rather different risk characteristics. We then looked at CHAPS and found that payment flows in CHAPS form a well-connected network whose properties change little day to day. This means that liquidity is able to flow efficiently around the network and that the network is quite resilient to shocks. This finding was backed up by examining the effects of a particular incident on the properties of the CHAPS network. In that particular instance, the effective removal of one bank for much of the day had little impact on the ability of other banks to make payments between one another.

Keywords: Network topology; CHAPS Sterling; interbank payment flows. (search for similar items in EconPapers)
JEL-codes: D85 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-net
Date: 2008-11-24

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Persistent link: http://EconPapers.repec.org/RePEc:boe:boeewp:0355

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