Gridlock Resolution in Interbank Payment Systems

Bank of Finland Working Paper No. 9/2001

34 Pages Posted: 30 Jun 2001

See all articles by Kimmo Soramaki

Kimmo Soramaki

European Central Bank (ECB)

Morten L. Bech

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures

Date Written: June 13, 2001

Abstract

The paper analyses the severity of gridlocks in interbank payment systems operating on a real time basis and evaluates by means of simulations the merits of a gridlock resolution algorithm. Data used in the simulations consist of actual payments settled in the Danish and Finnish RTGS systems. The algorithm is found to be applicable to a real time environment and effective in reducing queuing in the systems at all levels of liquidity, but in particular when intra-day liquidity is scarce.

Keywords: payment systems, liquidity, gridlock, algorithms, settlement

JEL Classification: E58

Suggested Citation

Soramaki, Kimmo and Bech, Morten L., Gridlock Resolution in Interbank Payment Systems (June 13, 2001). Bank of Finland Working Paper No. 9/2001, Available at SSRN: https://ssrn.com/abstract=274290 or http://dx.doi.org/10.2139/ssrn.274290

Kimmo Soramaki (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Morten L. Bech

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland
41612808923 (Phone)

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