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

Journal of Financial Market Infrastructures

Abstract: This paper presents a methodology to detect potential failing participants in largevalue payment systems and to measure the intraday impact of outages, considering liquidity, systemic and receiver impacts in an automated way. Medium and high risk thresholds are established to create a combined risk indicator. Outages of large banks can be detected within 10 minutes, while smaller banks may take more than 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.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ7:7962419

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