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Behaviour in the Canadian large-value payment system: COVID-19 vs. the global financial crisis

Alexander Chaudhry, Anneke Kosse and Karen Sondergard

No 2021-7, Staff Analytical Notes from Bank of Canada

Abstract: The Large Value Transfer System (LVTS) is Canada’s electronic funds transfer system for large-value and time-critical payments. It forms the backbone of the Canadian financial system. If the payments in the LVTS were to come to a halt, this would have a systemic impact on overall economic activity and affect the stability of the Canadian financial system. In this note we discuss the role that the LVTS has played during the onset of the Covid-19 pandemic and we evaluate the stress experienced in the system in 2020. In particular, we examine the number and value of rejected and delayed payments, the proportion of Tranche 2 transactions and intraday bilateral credit limit adjustments. We show that lessons learned from the 2008–09 global financial crisis in terms of the timing and effectiveness of specific Bank of Canada policy measures have helped avoid potential liquidity stresses in the LVTS in 2020.

Keywords: Coronavirus disease (COVID-19); Financial institutions; Financial stability; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: E65 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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