Journal of Financial Market Infrastructures

Reaction functions of the participants in Colombia’s large-value payment system

Constanza Martínez and Freddy Cepeda

  • Payments reaction functions measure how disruptions affect the sending of payments
  • An institution's payments reaction depends on the types of incident and institutions 
  • There is coordination in the sending of payments


Large-value payment flows can be disrupted by several types of failures, such as operational incidents, problems experienced by the administrator of the payments settlement system, outages in communications networks and the inability of a participant to submit payments due to insufficient liquidity. During any of these incidents, the participants in the system can decide to stop, delay or continue sending payment orders, depending on the elements that originated the disruption as well as on the alternative liquidity sources available to each entity. By means of Tobit models with random effects, we evaluate the payments activity of Colombian financial institutions. Our results suggest that their reactions vary in accordance with the type of incident, along with the type of financial institution and its role in the market.

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