Monitoring intraday liquidity risks in a Real Time Gross Settlement System

Published: May 8, 2020

Payments Canada has released its latest discussion paper, Monitoring intraday liquidity risks in a Real Time Gross Settlement System. In this paper the intraday liquidity risk indicator (LRI) tool is developed to monitor potential risks in a real time gross settlement (RTGS) system. 

As Payments Canada’s Modernization project progresses LVTS will be replaced with an RTGS system, Lynx. In this paper, data from the LVTS is used to evaluate the forecasting performance of the LRI, the results show it can be used as an effective tool to predict and test future liquidity scenarios and outcomes for Lynx participants. Consequently, the LRI can provide forward-looking information for policy makers to take potential preemptive policy actions to avoid liquidity risk events or limit their effects in Lynx. The LRI can also be used as a metric to conduct liquidity stress testing for Lynx to provide insights for policy makers to monitor participants’ intraday liquidity risks under stressed scenarios. The initial outcomes of this paper in parallel with other research on moving to an RTGS system make way for future work in this area as we move closer to the go live of Lynx.