Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data

Abstract

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Towards a Network Description of Interbank Payment Flows

“…The observations of the presence of large circular net flows between TARGET countries add to the idea of Rosati and Secola (2005) that significant and stable payment patterns between countries could entail dependencies resulting in possible channels of contagion of liquidity tensions. Further work could aim at identifying the most important, circular flows in the (international) system and at investigating the implications of structural flows on the stability of the payment system.…”

“…When comparing this to classical equilibrium networks, the numbers indicate relatively high correlations in the form of clustering exist on a local level. As in Soramäki, et al (2007) the number of nodes with a clustering coefficient 0, however, is very high: 49% after one hour, 27% after one day. These can mostly be attributed to nodes with only one or just a few links, because the probability of at least a single link across neighbours increases rapidly with the number of links (more precise: the number of combinations of neighbours increases with the number of links squared).…”

“…3 These papers, however, do not focus on the network topology of the markets. Inaoka, et al (2004) and Soramäki, et al (2007) have started to describe large value financial payment systems (in Japan and the US, respectively) from a network perspective. Another example is Bech and Garrat (2006) which analyses the effects of a wide-scale disruption on the functioning of the interbank payment system.…”

“…In the case of the ten minute time frame, in the overwhelming majority of the 32% remaining cases there are only one or two minimally sized other components of two, three nodes. 21 And in for example Dorogovtsev and Mendes (2003) and Soramäki, et al (2007). 22 Payments through TARGET to and from different banks in the same EU country are all recorded under the same country code and therefore belong to the same node.…”

An Economic Analysis of the Single Euro Payments Area (SEPA)

“…Frequently cited papers prepared by business consultancies are EFMA (2005 and. Recent research papers analyzing issues related to European payment systems are Humphrey et al (2006), Bolt and Humphrey (2005), and Rosati and Secola (2006), for example. 2 Other papers analyzing spatial models of bank competition are Wong and Chan (1993), Barros (1999) or Toolsema (2004), for example.…”