Analysis, by simulation, of the impact of a technical default of a payment system participant

E. Mazars and G. Woelfel

Financial Stability Review, 2005, issue 6, 113-124

Abstract: Payment systems play a very important role in ensuring the safe and efficient transfer of deposits and financial instruments. Consequently, the failure of these systems may have a destabilising impact. Business continuity plans have thus been developed to ensure their robustness. However, their smooth functioning is also contingent on the capacity of participants to submit their payment orders. The Banque de France, in its role of overseer of the French payment systems, conducted a study with a view to enhancing its understanding of the consequences and the impact of the technical default of a participant in such systems. This study, carried out using a simulator of the functioning of the Paris Net Settlement (PNS) large-value payment system, operated by the CRI (Centrale des Règlements Interbancaires), shows that the technical default of a participant in this system has negative consequences on the smooth running of the system. Indeed, a situation in which a major participant, in the wake of a technical incident, is unable to submit its payment orders in a normal fashion to its counterparties in PNS, could further exacerbate congestion in the system and result in almost 10% of payments being rejected among non-defaulting participants. The consequences of a technical default could nevertheless be greatly reduced if the participants set their bilateral sender limits at a lower level than that currently observed and if they reacted rapidly to information indicating a technical default by reducing their bilateral limits with the defaulting participant (defaulter).

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:fisrev:2005:6:5

Access Statistics for this article

More articles in Financial Stability Review from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().