Abstract

Abstract While the literature has tended to focus primarily on credit and liquidity risk in payment and settlement processes, it is clear that other sources of systemic risk namely, operational and business risks in system providers – might also be important. Costs arising from crystallization of these risks can be particularly high if the provision of infrastructure is concentrated and rerouting of payments to a substitute system is not possible in the event of a failure. But costs can also be high if member-level responses affect activity and risk exposures in dependent markets; or if outages occur during stressed or high-volume periods, exacerbating nervousness in markets and triggering further uncertainty. This chapter focuses initially on the effects of operational shocks and how their impact might be contained.

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