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Using synthetic data to evaluate the impact of RTGS on systemic risk in the Australian payments system

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  • Docherty, Peter
  • Wang, Gehong

Abstract

This paper develops a new methodology for allowing researchers outside central banks to test the extent of payment system risk, and applies this methodology to an investigation of the impact that the introduction of real time gross settlement (RTGS) had on systemic risk in the Australian payments system. System-specific ratios are first developed to extract bilateral payment obligations from aggregate payments data in the Australian RTGS system. This synthetic data is then used to generate a deferred net settlement (DNS) system of similar dimensions to those the Australian system would have had, had RTGS not been introduced. Standard default simulation methodology is then applied to test the levels of systemic risk in both this system and the corresponding RTGS system to ascertain the degree to which the introduction of RTGS is likely to have reduced the level of risk. We find that while the level of systemic risk is likely to have been reduced in the Australian case, the size of the effect is small, a finding consistent with the results of payments system studies in other countries.

Suggested Citation

  • Docherty, Peter & Wang, Gehong, 2010. "Using synthetic data to evaluate the impact of RTGS on systemic risk in the Australian payments system," Journal of Financial Stability, Elsevier, vol. 6(2), pages 103-117, June.
  • Handle: RePEc:eee:finsta:v:6:y:2010:i:2:p:103-117
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    Cited by:

    1. Schulz, Christian, 2011. "Liquidity requirements and payment delays - participant type dependent preferences," Working Paper Series 1291, European Central Bank.
    2. Pedro Sá Silva & Jorge Pinto & João Varajão & António Trigo & Isabel Bentes & Humberto Varum, 2012. "Potential Use of the Theory of Vulnerability in Information Systems," Information Resources Management Journal (IRMJ), IGI Global, vol. 25(2), pages 22-33, April.
    3. Clara Machado & Carlos León & Miguel Sarmiento & Freddy Cepeda & Orlando Chipatecua & Jorge Cely, 2011. "Riesgo Sistémico Y Estabilidad Del Sistema De Pagos De Alto Valor En Colombia: Análisis Bajo," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(65), pages 106-175, Junio.
    4. Peter Docherty & Gehong Wang, 2009. "A Revided Exposition of the Methodology for Testing Payments Systems Risk," Working Paper Series 159, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    5. Soramäki, Kimmo & Cook, Samantha, 2012. "Algorithm for identifying systemically important banks in payment systems," Economics Discussion Papers 2012-43, Kiel Institute for the World Economy (IfW).
    6. Soramäki, Kimmo & Cook, Samantha, 2013. "SinkRank: An algorithm for identifying systemically important banks in payment systems," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-27.
    7. Capponi, Agostino & Chen, Peng-Chu, 2015. "Systemic risk mitigation in financial networks," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 152-166.

    More about this item

    Keywords

    Payments system Real time gross settlement (RTGS) Deferred net settlement (DNS) Systemic risk Contagion;

    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

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