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Analysis of the Payment System of the National Bank of Serbia – simulation-based approach

Author

Listed:
  • Aleksandar Dimitrijevic

    (National Bank of Serbia)

  • Milan Nikolic

    (National Bank of Serbia)

  • Miro Vukoje

    (National Bank of Serbia)

Abstract

Using the simulation-based approach, this paper aims to investigate the influence of operational problems which occur at two most important prticipants on the system as a whole as well as on the other participants of the payment system of the National Bank of Serbia. To the best of our knowledge, this is the first paper which examines, by use of simulations, the consequences of operational problems ocurring at the participants of the payment system of the National Bank of Serbia. Two scenarios were examined. In the first scenario, the most important participant is facing operational problems, while in the second scenario operational problems at two most important participants were supposed. Restrictively designed scenarios show that operational problems at the most important participants can seriously affect other participants' ability to settle their payments. In addition, in order to capture possible behavioral reactions by other participants, we investigate whether the application of the stop-sending rule can reduce the magnitude of contagion. We find that the application of this rule can substantially reduce the effects of the operational problems. However, the rule also reduces the number of transactions in the system as well as the total turnover. At the end, we determined the probabilty of defaults for each account used in our analysis.

Suggested Citation

  • Aleksandar Dimitrijevic & Milan Nikolic & Miro Vukoje, 2012. "Analysis of the Payment System of the National Bank of Serbia – simulation-based approach," Working papers 20, National Bank of Serbia.
    • Handle: RePEc:nsb:wppnbs:20
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    File URL: https://www.nbs.rs/documents/publikacije/strucni-radovi/2011_19_TB_e.pdf
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    References listed on IDEAS

    as
    1. Darcey McVanel, 2005. "The Impact of Unanticipated Defaults in Canada's Large Value Transfer System," Staff Working Papers 05-25, Bank of Canada.
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    More about this item

    Keywords

    simulations; payment system; operational risk; stop-sending rule;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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