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Simulation of bank behaviour in times of stress

03 May 2012

Large value payment systems provided by the central bank, settle payments with on average a large value (approximately EUR 7 million). Important characteristics of these systems are that they are fast, safe and reliable. The participants of these systems consist mainly of commercial banks.

Because the most important, read largest, payment flows go through these systems, they contain valuable information on the financial situation of banks. Especially due to the crisis, the interest in payment systems and payment system data has increased.

This thesis makes use of these data to make simulations, to study network structures and developments in the interbank money market and to obtain information on the financial position of banks. With simulations it is possible to study “what-if” like questions, like what if a bank cannot fulfill its payment obligations anymore?
The simulation executed in this thesis studies the question how sensitive the payment system is to a change in the outgoing payment flow of one large bank. The study of network structures shows what the (potential) impact of a given disruption is (e.g. a failure of a bank) to other banks in the payment system.
The payment system data is also used to develop a method to monitor the liquidity position of banks. To gain more insight in the behaviour of banks in times of stress both the transaction data has been studied during times of stress (like failures, nationalization, state support) and an experimental study has been carried out. These insight can be used in simulations so make them more realistically.

Curriculum vitae

Ronald Heijmans (1977) studied astronomy at the university of Leiden. Hij conducted his PhD research at the Faculty of Economics and Business and will be awarded a PhD on 10 May (12.45pm). Thesis supervisor is professor J. de Haan, and the thesis title: Analysis of large value payment systems: liquidity behaviour and disruptions. Heijmans is employed by the Dutch Central Bank.

Last modified:04 July 2014 9.31 p.m.

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