The Role of Counterparty Risk in CHAPS Following the Collapse of Lehman Brothers

Benos, Evangelos; Stability, Financial; Garratt, Rodney; Zimmerman, Peter

Abstract

We study the impact of the global financial crisis on CHAPS, the United Kingdom's large-value wholesale payments system, over the period 2006-2009. Payments data show that in the two months following the Lehman Brothers failure, banks did, on average, make payments at a slower pace than before the failure. We show that this slowdown is related to concerns about counterparty default risk, thereby identifying a new channel through which counterparty risk manifests itself in financial markets.

Citation

Benos, E., Stability, F., Garratt, R., & Zimmerman, P. (2014). The Role of Counterparty Risk in CHAPS Following the Collapse of Lehman Brothers. International Journal of Central Banking, 10(4), 143-171

• Journal Article Type: Article
• Acceptance Date: Feb 1, 2014
• Publication Date: Dec 1, 2014
• Deposit Date: Apr 23, 2020
• Publicly Available Date: Apr 29, 2020
• Journal: International Journal of Central Banking
• Print ISSN: 1815-4654
• Peer Reviewed: Peer Reviewed
• Volume: 10
• Issue: 4
• Pages: 143-171
• Keywords: Intraday liquidity; Payments; Credit default swap; Counterparty risk JEL code: E42
• Public URL: https://nottingham-repository.worktribe.com/output/4330116
• Related Public URLs: https://ideas.repec.org/a/ijc/ijcjou/y2014q4a5.html