Assessing operational risk in CHAPS Sterling: a simulation approach

The Bank of England has published an article detailing a series of simulation experiments designed to assess the ability of CHAPS Sterling to withstand certain types of operational disruption.

The article’s introduction states:

“The operational resilience of market infrastructures, large-value payment systems in particular, is important to maintaining financial stability. The United Kingdom’s CHAPS Sterling system, for example, allows financial
institutions to settle payment obligations associated with financial market transactions; a disruption to normal payment processing activity could therefore result in the build-up of significant unwanted risk exposures.

This article presents the results of a series of simulation experiments designed to assess quantitatively the ability of CHAPS Sterling to withstand certain types of operational disruption. The analysis shows that the system exhibits a high level of resilience, reflecting the effectiveness of the operational risk controls that are in place and the ample amount of liquidity available in the system.”

Read the article.

•Date: 23rd June 2004 • Region: UK •Type: Article •Topic: Operational risk
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