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Gridlock Resolution in Interbank Payment Systems

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Author Info

  • Bech , Morten L.
  • Soramäki, Kimmo

Abstract

The paper analyses the severity of gridlocks in interbank payment systems operating on a real time basis and evaluates by means of simulations the merits of a gridlock resolution algorithm. Data used in the simulations consist of actual payments settled in the Danish and Finnish RTGS systems. The algorithm is found to be applicable to a real time environment and effective in reducing queuing in the systems at all levels of liquidity, but in particular when intra-day liquidity is scarce.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0109.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 9/2001.

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Length: 34 pages
Date of creation: 13 Jun 2001
Date of revision:
Handle: RePEc:hhs:bofrdp:2001_009

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: payment systems; liquidity; gridlock; algorithms; settlement;

References

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  1. Bech, Morten L. & Garratt, Rod, 2003. "The intraday liquidity management game," Journal of Economic Theory, Elsevier, vol. 109(2), pages 198-219, April.
  2. Guntzer, Michael M. & Jungnickel, Dieter & Leclerc, Matthias, 1998. "Efficient algorithms for the clearing of interbank payments," European Journal of Operational Research, Elsevier, vol. 106(1), pages 212-219, April.
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Citations

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Cited by:
  1. Morten L. Bech & Antoine Martin & James McAndrews, 2012. "Settlement liquidity and monetary policy implementation—lessons from the financial crisis," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 3-20.
  2. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, EconWPA.
  3. Leonardo Bartolini & Spence Hilton & James McAndrews, 2008. "Settlement delays in the money market," Staff Reports 319, Federal Reserve Bank of New York.
  4. Iivarinen , Timo, 2004. "Large value payment systems: principles and recent and future developments," Research Discussion Papers 13/2004, Bank of Finland.
  5. Julio J. Rotemberg, 2008. "Liquidity Needs in Economies with Interconnected Financial Obligations," NBER Working Papers 14222, National Bureau of Economic Research, Inc.
  6. Kurt Johnson & James J. McAndrews & Kimmo Soramaki, 2004. "Economizing on liquidity with deferred settlement mechanisms," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 51-72.
  7. Neville Arjani, 2006. "Examining the Trade-Off between Settlement Delay and Intraday Liquidity in Canada's LVTS: A Simulation Approach," Working Papers 06-20, Bank of Canada.
  8. Leinonen, Harry & Soramäki, Kimmo, 2003. "Simulating interbank payment and securities settlement mechanisms with the BoF-PSS2 simulator," Research Discussion Papers 23/2003, Bank of Finland.

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