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Topology of the Hungarian large-value transfer system

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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.

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Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2006/57.

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Length: 43 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mnb:opaper:2006/57

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Web page: http://www.mnb.hu/
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Related research

Keywords: real time gross settlement; large-value transfer system; structure; network; topology; centrality indices.;

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Cited by:
  1. Clara Lía Machado & Carlos León & Miguel Sarmiento & Freddy Cepeda & Orlando Chipatecua & Jorge cely, . "Riesgo Sistémico y Estabilidad del Sistema de Pagos de Alto Valor en Colombia: Análisis bajo Topología de Redes y Simulación de Pagos," Borradores de Economia 627, Banco de la Republica de Colombia.
  2. 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.
  3. Marc Pr�pper & Iman van Lelyveld & Ronald Heijmans, 2008. "Towards a Network Description of Interbank Payment Flows," DNB Working Papers 177, Netherlands Central Bank, Research Department.
  4. Edson Bastos e Santos & Rama Cont, 2010. "The Brazilian Interbank Network Structure and Systemic Risk," Working Papers Series 219, Central Bank of Brazil, Research Department.

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