Reaction functions of the participants in Colombia’s large-value payment system

Constanza Martínez and Freddy Cepeda

Journal of Financial Market Infrastructures

Abstract: ABSTRACT Large-value payment flows can be disrupted by several types of failures, such as;operational incidents, problems experienced by the administrator of the payments;settlement system, outages in communications networks and the inability of a participant;to submit payments due to insufficient liquidity. During any of these incidents,;the participants in the system can decide to stop, delay or continue sending payment;orders, depending on the elements that originated the disruption as well as on the;alternative liquidity sources available to each entity. By means of Tobit models with;random effects, we evaluate the payments activity of Colombian financial institutions.;Our results suggest that their reactions vary in accordance with the type of incident,;along with the type of financial institution and its role in the market.

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