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135 Results

Network Analysis and Canada's Large Value Transfer System

Staff Discussion Paper 2009-13 Lana Embree, Tom Roberts
Analysis of the characteristics and structure of a network of financial institutions can provide insight into the complex relationships and interdependencies that exist in a payment, clearing, and settlement system (PCSS), and allow an intuitive understanding of the PCSS's efficiency, stability, and resiliency.
June 11, 2009

Collateral Management in the LVTS by Canadian Financial Institutions

This article examines the incentives for banks to hold various assets on their balance sheets for use as collateral when the opportunity cost of doing so can be high. Focusing on the five-year period (2002-07) that preceded the financial crisis, it examines the choices made by financial institutions among the assets that are pledged as collateral in Canada's Large Value Transfer System. This serves as a baseline for collateral-management practices during relatively normal times. The results of this study are important for policy-makers, especially the Bank of Canada, which is concerned both about the efficient functioning of fixed-income markets and about the credit risk it ultimately bears in insuring LVTS settlement. The results suggest that relative market liquidity and market-making capacity are important factors in the choice of securities pledged as collateral in the LVTS.

A Survey and Risk Analysis of Selected Non-Bank Retail Payments Systems

Staff Discussion Paper 2008-17 Nikil Chande
Payment services offered by non-banks have flourished in recent years. The author provides an overview of the different kinds of non-bank retail payments schemes currently available in Canada, illustrating each by focusing on a specific example.

Which Bank is the "Central" Bank? An Application of Markov Theory to the Canadian Large Value Transfer System

Staff Working Paper 2008-42 Morten Bech, James Chapman, Rod Garratt
We use a method similar to Google's PageRank procedure to rank banks in the Canadian Large Value Transfer System (LVTS). Along the way we obtain estimates of the payment processing speeds for the individual banks.
Content Type(s): Staff research, Staff working papers Topic(s): Payment clearing and settlement systems JEL Code(s): C, C1, C11, E, E5, E50, G, G2, G20

What To Do about Bilateral Credit Limits in the LVTS When a Closure Is Anticipated: Risk versus Liquidity Sharing among LVTS Participants

Staff Discussion Paper 2008-13 Sean O'Connor, Greg Caldwell
The authors examine the effect of a trade-off between shared credit risk and liquidity efficiency, among participants in Tranche 2 of the Large Value Transfer System (LVTS T2), on their decisions to leave open, or close, their bilateral credit limits (BCLs) to a participant at risk of imminent closure.

Liquidity Efficiency and Distribution in the LVTS: Non-Neutrality of System Changes under Network Asymmetry

Staff Discussion Paper 2008-11 Sean O'Connor, James Chapman, Kirby Millar
The authors consider the liquidity efficiency of Tranche 2 of the Large Value Transfer System (LVTS T2) by examining, through an empirical analysis, some plausible strategic reactions of individual participants to a systemwide shock to available liquidity in the system.

The Implementation of Monetary Policy in Canada

Staff Discussion Paper 2008-9 Walter Engert, Toni Gravelle, Donna Howard
The authors present a detailed discussion of the Bank of Canada's framework for the implementation of monetary policy. As background, they provide a brief overview of the financial system in Canada, including a discussion of the financial services industry and the money market.

Policy Coordination in an International Payment System

Staff Working Paper 2008-17 James Chapman
Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators.

The Effects of a Disruption in CDSX Settlement on Activity in the LVTS: A Simulation Study

Staff Discussion Paper 2008-7 Lana Embree, Kirby Millar
The Large Value Transfer System (LVTS) for settling large payments, and CDSX for settling debt and equity trades, are two of the main settlement systems in Canada. They are closely linked; for example, at the end of the day the final CDSX payment obligations must settle on the Bank of Canada's books, with payments made […]

A Model of Tiered Settlement Networks

Staff Working Paper 2008-12 James Chapman, Jonathan Chiu, Miguel Molico
This paper develops a model of settlement system to study the endogenous structure of settlement networks, and the welfare consequences of clearing agent failure. The equilibrium degree of tiering is endogenously determined by the cost structure and the information structure.
Content Type(s): Staff research, Staff working papers Topic(s): Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, G, G2, G21
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