Authors:
Richard Heuver
1
and
Ron Triepels
2
Affiliations:
1
De Nederlandsche Bank, Amsterdam and The Netherlands
;
2
De Nederlandsche Bank, Amsterdam, The Netherlands, Tilburg University, Tilburg and The Netherlands
Keyword(s):
Liquidity Stress, Risk Monitoring, Financial Market Infrastructures, Large-value Payment Systems.
Related
Ontology
Subjects/Areas/Topics:
Artificial Intelligence
;
Biomedical Engineering
;
Biomedical Signal Processing
;
Computational Intelligence
;
Data Manipulation
;
Evolutionary Computing
;
Health Engineering and Technology Applications
;
Human-Computer Interaction
;
Industrial Applications of AI
;
Knowledge Discovery and Information Retrieval
;
Knowledge-Based Systems
;
Machine Learning
;
Methodologies and Methods
;
Neural Networks
;
Neurocomputing
;
Neurotechnology, Electronics and Informatics
;
Pattern Recognition
;
Physiological Computing Systems
;
Sensor Networks
;
Signal Processing
;
Soft Computing
;
Symbolic Systems
;
Theory and Methods
Abstract:
Liquidity stress constitutes an ongoing threat to financial stability in the banking sector. A bank that manages its liquidity inadequately might find itself unable to meet its payment obligations. These liquidity issues, in turn, can negatively impact the liquidity position of many other banks due to contagion effects. For this reason, central banks carefully monitor the payment activities of banks in financial market infrastructures and try to detect early-warning signs of liquidity stress. In this paper, we investigate whether this monitoring task can be performed by supervised machine learning. We construct probabilistic classifiers that estimate the probability that a bank faces liquidity stress. The classifiers are trained on a dataset consisting of various payment features of European banks and which spans several known stress events. Our experimental results show that the classifiers detect the periods in which the banks faced liquidity stress reasonably well.