Near real-time monitoring in real-time gross settlement systems: A traffic light approach

Ron Berndsen, Ronald Heijmans

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper develops a method to identify quantitative risks in financial market infrastructures (FMIs), which are inspired by the Principles for Financial Market Infrastructures. We convert transaction level data into indicators that provide information on operational risk, concentration risk and liquidity dependencies. As a proof of concept we use TARGET2 data. The indicators are based on legislation, guidelines and their own history. Indicators that are based on their own history are corrected for cyclical patterns. Our method includes a setup of the signaling threshold of relevant changes. For the signaling, we opt for a traffic light approach: a green, amber or red light for a small, moderate or substantial change in the indicator, respectively. The indicators developed in this paper can be used by overseers/regulators, operators of FMIs and by financial stability experts.
Original languageEnglish
Pages (from-to)39-64
JournalThe Journal of Risk
Volume22
Issue number3
DOIs
Publication statusPublished - Jan 2020

    Fingerprint

Cite this