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Payment System Design and Participant Operational Disruptions

Author

Listed:
  • Ashwin Clarke

    (Reserve Bank of Australia)

  • Jennifer Hancock

    (Reserve Bank of Australia)

Abstract

Real-time gross settlement (RTGS) systems often incorporate features designed to economise on liquidity. Such 'hybrid features' have the potential to mitigate the systemic impact of operational disruptions of participants. This paper simulates operational disruptions of participants, using data from Australia's RTGS system – the Reserve Bank Information and Transfer System (RITS) – to analyse the effect of these hybrid features on the systemic impact of such disruptions. The results suggest that the bilateral-offset algorithm and sub-limit feature in RITS generally mitigate the impact of a participant's operational disruption, even if there is less liquidity committed to the RTGS system. The hybrid features of the Australian RTGS system also mean that the size of the participant with the operational disruption has less effect on the systemic impact of that disruption than otherwise. While a central queue, in and of itself, would tend to mitigate the impact of a participant's operational disruption, methodological issues make it difficult to draw any conclusions regarding this hybrid feature in this paper.

Suggested Citation

  • Ashwin Clarke & Jennifer Hancock, 2012. "Payment System Design and Participant Operational Disruptions," RBA Research Discussion Papers rdp2012-05, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2012-05
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    File URL: https://www.rba.gov.au/publications/rdp/2012/pdf/rdp2012-05.pdf
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    References listed on IDEAS

    as
    1. Martin, Antoine & McAndrews, James, 2008. "Liquidity-saving mechanisms," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 554-567, April.
    2. Merrouche, Ouarda & Schanz, Jochen, 2010. "Banks' intraday liquidity management during operational outages: Theory and evidence from the UK payment system," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 314-323, February.
    3. Galbiati, Marco & Soramaki, Kimmo, 2010. "Liquidity-saving mechanisms and bank behaviour," Bank of England working papers 400, Bank of England.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Benos, Evangelos & Ferrara, Gerardo & Gurrola-Perez, Pedro, 2017. "The impact of de-tiering in the United Kingdom’s large-value payment system," Bank of England working papers 676, Bank of England.
    2. Anneke Kosse & Zhentong Lu, 2022. "Transmission of Cyber Risk Through the Canadian Wholesale Payment System," Staff Working Papers 22-23, Bank of Canada.

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    More about this item

    Keywords

    large-value payment system; operational disruption; liquidity; simulation;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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