Unanticipated Defaults And Losses In Canada~s Large-Value Payments System, Revisited

The authors use a much larger set of daily payments data - with three times as many observations - to examine the simulated losses of private sector participants and the Bank from defaults in the payments system. They also gauge the upper bound of possible losses in the period April 2004 to April 2006. The authors conclude that losses from a participant failure in the large-value payments system are very likely to be small and readily manageable, as in McVanel (2005). For one or two small participants, under some (probably extreme) conditions, losses could be significant, but not solvency threatening. In sum, the risk controls of the large-value payments system allow and encourage participants to keep potential losses manageable.