A liquidity black hole: What is the impact of a failing participant in a large value payment system and does time matter?

Ronald Heijmans and Ellen van der Woerd

Working Papers from DNB

Abstract: This paper presents a methodology to detect potential failing participants in large value payment systems and measure the intraday impact of outages, considering Liquidity, Systemic, and Receiver Impacts. Medium and high risk thresholds are es- tablished to create a combined risk indicator. Outages of large banks can be detected within 10 minutes, while smaller banks may take over 30 minutes. Impact and risk levels vary by the size of the bank and the start time of the outage. Large banks can reach high-risk levels in 30 minutes, highlighting the need for timely detection, whereas smaller banks rarely reach high-risk levels.

Keywords: Financial market infrastructures; TARGET2; liquidity risk; operational risk; systemic risk; financial stability (search for similar items in EconPapers)
JEL-codes: E42 E50 E58 E59 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:836

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