Payment clearing and settlement systems

• June 7, 2018

  Establishing a Resolution Regime for Canada’s Financial Market Infrastructures

  Financial System Review - June 2018 Elizabeth Woodman, Lucia Chung, Nikil Chande

  This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial markets, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G1, G10, G19, G2, G20, G28, G29

• Analysis of Asymmetric GARCH Volatility Models with Applications to Margin Measurement

  Staff Working Paper 2018-21 Elena Goldman, Xiangjin Shen

  We explore properties of asymmetric generalized autoregressive conditional heteroscedasticity (GARCH) models in the threshold GARCH (GTARCH) family and propose a more general Spline-GTARCH model, which captures high-frequency return volatility, low-frequency macroeconomic volatility as well as an asymmetric response to past negative news in both autoregressive conditional heteroscedasticity (ARCH) and GARCH terms.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G1, G19, G2, G23, G28
• May 9, 2018

  Strengthening Our Cyber Defences

  Remarks Filipe Dinis Payments Canada Toronto, Ontario

  Chief Operating Office Filipe Dinis outlines how the Bank is strengthening its cyber defenses and helping improve the financial system’s cyber resilience and its ability to recover quickly from attacks.

  Content Type(s): Press, Speeches Topic(s): Cyber defenses, Cyber security, Financial stability, Payment clearing and settlement systems

• A Policy Framework for E-Money: A Report on Bank of Canada Research

  Staff Discussion Paper 2018-5 Mohammad Davoodalhosseini, Francisco Rivadeneyra

  We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Digital Currencies and Fintech, Monetary Policy, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E5, E51, E52, E58

• A Calibrated Model of Intraday Settlement

  Staff Discussion Paper 2018-3 Héctor Pérez Saiz, Siddharth Untawala, Gabriel Xerri

  This paper estimates potential exposures, netting benefits and settlement gains by merging retail and wholesale payments into batches and conducting multiple intraday settlements in this hypothetical model of a single "calibrated payments system." The results demonstrate that credit risk exposures faced by participants in the system are largely dependent on their relative activity in the retail and wholesale payments systems.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G2, G21, G23

• Tail Risk in a Retail Payment System: An Extreme-Value Approach

  Staff Discussion Paper 2018-2 Héctor Pérez Saiz, Blair Williams, Gabriel Xerri

  The increasing importance of risk management in payment systems has led to the development of an array of sophisticated tools designed to mitigate tail risk in these systems. In this paper, we use extreme value theory methods to quantify the level of tail risk in the Canadian retail payment system (ACSS) for the period from 2002 to 2015.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G2, G21, G23
• December 14, 2017

  Three Things Keeping Me Awake at Night

  Remarks Stephen S. Poloz Canadian Club Toronto Toronto, Ontario

  Governor Stephen S. Poloz discusses his long-term economic preoccupations now that the Canadian economy has nearly completed its journey home.

  Content Type(s): Press, Speeches Topic(s): Digital Currencies and Fintech, Financial stability, Housing, Monetary Policy, Payment clearing and settlement systems, Potential output

• What Drives Episodes of Settlement Fails in the Government of Canada Bond Market?

  Staff Working Paper 2017-54 Jean-Sébastien Fontaine, James Pinnington, Adrian Walton

  We study settlement fails for trades in the Government of Canada bond market. We find that settlement fails do not occur independently. Using a novel and comprehensive dataset, we examine three drivers of fails.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial markets, Market structure and pricing, Payment clearing and settlement systems JEL Code(s): E, E4, G, G1, G2, G21, L, L1

• Central Bank Digital Currency: Motivations and Implications

  Staff Discussion Paper 2017-16 Walter Engert, Ben Fung

  The emergence of digital currencies such as Bitcoin and the underlying blockchain and distribution ledger technology have attracted significant attention. These developments have raised the possibility of considerable impacts on the financial system and perhaps the wider economy.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Bank notes, Digital Currencies and Fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5
• November 16, 2017

  Acceptance and Use of Payments at the Point of Sale in Canada

  Bank of Canada Review - Autumn 2017 Ben Fung, Kim Huynh, Anneke Kosse

  Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.

  Content Type(s): Publications, Bank of Canada Review Article Topic(s): Bank notes, Digital Currencies and Fintech, Financial Institutions, Payment clearing and settlement systems JEL Code(s): D, D2, D23, D24, E, E4, E41, E42, G, G2, G21, L, L2