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Liquidity Risk and Interdependence in Payment Systems: The Case of Peru

Author

Listed:
  • Jushua Baldoceda

    (Central Reserve Bank of Peru)

  • Anthony Meza

    (Central Reserve Bank of Peru)

Abstract

The failure of a financial institution (banks and microfinance institutions) to meet its payment obligations can have implications, not only for its continuity, but also for the stability of payment systems, markets, and the financial system in general. Central banks, as monetary authorities, regulators, and overseers of a country's payment infrastructures must monitor the liquidity risk of participants in those systems in order to prevent in time any event of this nature. To do this, the liquidity needs of the entities must be identified and anticipated to mitigate the possible effects of their inability to pay and the possible consequences on the payment systems. This paper reviews the literature on liquidity risks and their systemic consequences. It also presents different indicators of liquidity and interdependence built with the transactional data of the RTGS System, administered by the Central Reserve Bank of Peru. These indicators are contrasted with the participant's intraday facilities operations in the RTGS (from Jan-2010 to Nov-2021), in order to assess the liquidity problem and its consequences from a systemic point of view.

Suggested Citation

  • Jushua Baldoceda & Anthony Meza, 2022. "Liquidity Risk and Interdependence in Payment Systems: The Case of Peru," IHEID Working Papers 01-2022, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp01-2022
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    References listed on IDEAS

    as
    1. Rodney J. Garratt, 2022. "An Application of Shapley Value Cost Allocation to Liquidity Savings Mechanisms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(6), pages 1875-1888, September.
    2. Evangelos Benos & Rodney J. Garratt & Peter Zimmerman, 2014. "The Role of Counterparty Risk in CHAPS Following the Collapse of Lehman Brothers," International Journal of Central Banking, International Journal of Central Banking, vol. 10(4), pages 143-172, December.
    3. Heuver, Richard A. & Berndsen, Ron J., 2022. "Liquidity coverage ratio in a payment network: Uncovering contagion paths," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(1).
    4. Morten L. Bech & Rodney J. Garratt, 2012. "Illiquidity in the Interbank Payment System Following Wide‐Scale Disruptions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(5), pages 903-929, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    RTGS; liquidity risk; systemic risk; indicators;
    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

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