Interbank Payment Flows and Excess Reserves

The interbank fund transfer systems are not only one of the effective measures for Central Bank to perform payment service functions, but also an infrastructure for central bank to carry out monetary policy. This paper makes the empirical analysis for the payment data of the 15 banks in the large value payment system of China, and uses Value-at-Risk (VaR) to estimate the risk of payment flows of large value among banks in the payment system, and so as to forecast the changes of banks' excess reserve. Further, this paper explores the relationship between the interbank payment flows and excess reserve deposits in banks and finds that the excess reserves in different banks will change with the changes of interbank payment flows. Therefore, the paper comes to some conclusions that central bank should consider the different characteristics and risks of participating banks' payment flows, and take some measures to ensure the participating banks' payment goes smoothly when managing and adjusting the reserve requirement ratios of same kinds of participating banks. Of course, this paper advances some new methods of forecasting changes of commercial banks' excess reserves, which provide a new idea for managing liquidity of commercial banks