Estimating Settlement Risk and the Potential for Contagion in Canada's Automated Clearing Settlement System
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 02-41.
Length: 51 pages Abstract: Payments systems operate virtually unnoticed in our daily lives and yet are crucial to a wellfunctioning economy and financial system. Because they explicitly link financial institutions, payments systems provide a way to transmit risk within, and between, financial systems. Ideally, payments systems should be designed and operated so as not to add risk in the event of a crisis. The author examines the potential for contagion through linkages arising from the interaction of financial institutions in a Canadian payments system, the Automated Clearing Settlement System (ACSS). A method of measuring risk in the system, given its unique design, is developed and used to estimate contagion over a wide range of conditions. The author finds, first and foremost, that the ACSS has only a limited capacity, if any, to facilitate contagion in the current environment.
Date of creation: 2002
Date of revision:
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Financial institutions; Payments; clearing and settlements systems;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-21 (All new papers)
- NEP-CMP-2003-04-21 (Computational Economics)
- NEP-FMK-2003-04-21 (Financial Markets)
- NEP-MAC-2003-04-21 (Macroeconomics)
- NEP-RMG-2003-04-21 (Risk Management)
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