The network topology of CHAPS Sterling
In this paper, we seek to understand the network topology of large-value interbank payment flows in the United Kingdom so as to understand better the risks associated with the system. We first examined the broad network topology of interbank payments in the United Kingdom. We found that, despite the fact that there are far fewer banks in the United Kingdom than in the United States, the structure of UK interbank payments is similar in certain respects to that of the United States, but that the tiered structure of the UK system implies rather different risk characteristics. We then looked at CHAPS and found that payment flows in CHAPS form a well-connected network whose properties change little day to day. This means that liquidity is able to flow efficiently around the network and that the network is quite resilient to shocks. This finding was backed up by examining the effects of a particular incident on the properties of the CHAPS network. In that particular instance, the effective removal of one bank for much of the day had little impact on the ability of other banks to make payments between one another.
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| Length: | 27 pages |
| Date of creation: | 24 Nov 2008 |
| Date of revision: | |
| Handle: | RePEc:boe:boeewp:0355 |
| Contact details of provider: | Postal: Bank of England, Threadneedle Street, London, EC2R 8AH Phone: +44 (0)171 601 4030 Fax: +44 (0)171 601 5196 Web page: http://www.bankofengland.co.uk/ Email: More information through EDIRC
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crucitti, Paolo & Latora, Vito & Marchiori, Massimo & Rapisarda, Andrea, 2004. "Error and attack tolerance of complex networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 340(1), pages 388-394.
- Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007.
"The topology of interbank payment flows,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 379(1), pages 317-333.
- Kimmo Soramaki & Morten L. Bech & Jeffrey Arnold & Robert J. Glass & Walter E. Beyeler, 2006. "The topology of interbank payment flows," Staff Reports 243, Federal Reserve Bank of New York.
- Christopher Becher & Marco Galbiati & Merxe Tudela, 2008. "The timing and funding of CHAPS sterling payments," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 113-133.
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