The interdependencies of payment and settlement systems

The Bank for International Settlements has published on 4th of June a report with the above name (pdf). The emergence of global financial institutions and national systems that are linked to each other e.g. to synchronise the two legs of foreign exchange transactions have created an environment where a disturbance in one system has the possibility of spreading to other systems. Our “agent-based” modelling approach for understanding this is featured on page 20 of the report.

A week after on 9-10 June Banque de France and the European Central Bank organised a joint conference to tackle the issue (see Program). We presented our model on interlinked payment systems with a focus on understanding how an operational disruption in one system (e.g. in Europe) may manifest in the other (e.g. US), analyzing the anatomy of the disruption and recovery from it. The slides of the talk are available here.

Update September 16, 2008. The minutes of the conference are now available.