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Topology of the Hungarian large-value transfer system

Author

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  • Ágnes Lublóy

    (Corvinus University of Budapest, Institute of Finance and Accounting)

Abstract

The paper deals with the topology of the Hungarian large-value transfer system, known as VIBER. The paper is generally descriptive in nature, the goal of the research being the assessment of the payment topology. A graph theoretical framework is applied; the graph representation allows a system-wide assessment of high-value payments. By taking interdependences between institutions into account, seven centrality indices are defined. The different measures of centrality focus on different aspects of the payment topology. The goal of applying graph theoretical methods is twofold. Firstly, the paper aims to analyse the permanency of the network over time. This is achieved by depicting the centrality measures, examining the correlation coefficients of the centrality indices across days, drawing empirical distributions and defining matrices of the strongest linkages. It is shown that the structure of the payments was permanent in June 2005; ad hoc relationships did not dominate the topology of the payments. The most central institutions were the same; the key players did not vary across days. One interesting feature of the topology was that only 30 per cent of the existing linkages were permanent linkages, although nearly 90 per cent of the payment orders were sent or received through these linkages. The Hungarian payment system can be characterised as a structure with multiple liquidity centres. Secondly, according to certain network criteria institutions most capable of generating contagion were identified. The fact that a liquidity crisis could arise if funds are not transferred to counterparties, although the counterparties might expect it, was taken into account. A well-defined group of institutions was identified; the illiquidity of these institutions could cause the most serious disruption of the payment system. Surprisingly, the institutions most capable of generating contagion were not the largest Hungarian banks measured by asset size. Rather they were directly or indirectly active players of the USD/HUF FX swap market.

Suggested Citation

  • Ágnes Lublóy, 2006. "Topology of the Hungarian large-value transfer system," MNB Occasional Papers 2006/57, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2006/57
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    File URL: http://www.mnb.hu/letoltes/op-57.pdf
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    Cited by:

    1. Marc Pröpper & Iman van Lelyveld & Ronald Heijmans, 2008. "Towards a Network Description of Interbank Payment Flows," DNB Working Papers 177, Netherlands Central Bank, Research Department.
    2. Fasianos, Apostolos & Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The Balancing Act: Household Indebtedness Over the Lifecycle," Quarterly Bulletin Articles, Central Bank of Ireland, pages 46-61, April.
    3. Spiros Bougheas & Alan Kirman, 2015. "Complex Financial Networks and Systemic Risk: A Review," Dynamic Modeling and Econometrics in Economics and Finance, in: Pasquale Commendatore & Saime Kayam & Ingrid Kubin (ed.), Complexity and Geographical Economics, edition 127, pages 115-139, Springer.
    4. Adams, Mark & Galbiati, Marco & Giansante, Simone, 2010. "Liquidity costs and tiering in large-value payment systems," Bank of England working papers 399, Bank of England.
    5. Ryan, Ellen, 2017. "The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting Policy," Quarterly Bulletin Articles, Central Bank of Ireland, pages 62-80, April.
    6. Wetherilt, Anne & Zimmerman, Peter & Soramaki, Kimmo, 2010. "The sterling unsecured loan market during 2006-08: insights from network theory," Bank of England working papers 398, Bank of England.
    7. Ãdám Banai & András Kollarik & András Szabó-Solticzky, 2014. "The Network Topology of the Hungarian Short-Term Foreign Exchange Swap Market," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 6(2).
    8. Leonidov, A. & Rumyantsev, E., 2013. "Russian Interbank Systemic Risks Assessment from the Network Topology Point of View," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 65-80.
    9. Clara Machado & Carlos León & Miguel Sarmiento & Freddy Cepeda & Orlando Chipatecua & Jorge Cely, 2011. "Riesgo Sistémico Y Estabilidad Del Sistema De Pagos De Alto Valor En Colombia: Análisis Bajo Topología De Redes Y Simulación De Pagos," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 29(65), pages 106-175, June.
    10. Jonnathan Cáceres Santos & René Aldazosa Inchauste, 2013. "Analizando el riesgo sistémico en Bolivia: una aplicación de modelos de topología de redes y simulación al funcionamiento del Sistema de Pagos de Alto Valor," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 17(2(2012)-1), pages 45-80, January.
    11. Edson Bastos Santos & Rama Cont, 2010. "The Brazilian Interbank Network Structure and Systemic Risk," Working Papers Series 219, Central Bank of Brazil, Research Department.
    12. Berlinger, Edina & Szenes, Márk & Michaletzky, Márton, 2011. "A fedezetlen bankközi forintpiac hálózati dinamikájának vizsgálata a likviditási válság előtt és után [Examination of the network dynamics of the uncovered interbank forint market before the liquid," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 229-252.
    13. Zenou, Yves & Patacchini, Eleonora & Cohen-Cole, Ethan, 2011. "Systemic Risk and Network Formation in the Interbank Market," CEPR Discussion Papers 8332, C.E.P.R. Discussion Papers.
    14. Kovács, László, 2010. "Hálózatok a gazdaságban. David Easley-Jon Kleinberg: Networks, Crowds and Markets. Reasoning about a Highly Connected World Cambridge University Press, Cambridge, 2010, 727 oldal [Networks in the e," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1110-1112.
    15. László Bodnár, 2017. "Network properties and evolutionof the Hungarian RTGSover the past decade," MNB Occasional Papers 2017/132, Magyar Nemzeti Bank (Central Bank of Hungary).
    16. Downey, Claire & Lyons, Paul & O'Malley, Terry, 2017. "Monitoring Ireland’s Payments using TARGET2," Quarterly Bulletin Articles, Central Bank of Ireland, pages 81-95, April.

    More about this item

    Keywords

    real time gross settlement; large-value transfer system; structure; network; topology; centrality indices.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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