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A liquidity black hole: What is the impact of a failing participant in a large value payment system and does time matter?

Author

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  • Ronald Heijmans
  • Ellen van der Woerd

Abstract

This paper presents a methodology to detect potential failing participants in large value payment systems and measure the intraday impact of outages, considering Liquidity, Systemic, and Receiver Impacts. Medium and high risk thresholds are es- tablished to create a combined risk indicator. Outages of large banks can be detected within 10 minutes, while smaller banks may take over 30 minutes. Impact and risk levels vary by the size of the bank and the start time of the outage. Large banks can reach high-risk levels in 30 minutes, highlighting the need for timely detection, whereas smaller banks rarely reach high-risk levels.

Suggested Citation

  • Ronald Heijmans & Ellen van der Woerd, 2025. "A liquidity black hole: What is the impact of a failing participant in a large value payment system and does time matter?," Working Papers 836, DNB.
    • Handle: RePEc:dnb:dnbwpp:836
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    References listed on IDEAS

    as
    1. Morten L. Bech & Bart Hobijn, 2007. "Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 147-181, September.
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    3. Heijmans, Ronald & Wendt, Froukelien, 2023. "Measuring the impact of a failing participant in payment systems," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(4).
    4. Klee, Elizabeth, 2010. "Operational outages and aggregate uncertainty in the federal funds market," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2386-2402, October.
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    More about this item

    Keywords

    Financial market infrastructures; TARGET2; liquidity risk; operational risk; systemic risk; financial stability;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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