Does Systemic Risk in the Financial Sector Predict Future Economic Downturns?

2011 ◽  
Author(s):  
Turan G. Bali ◽  
Linda Allen ◽  
Yi Tang
Keyword(s):  
Systemic Risk ◽  
Financial Sector ◽  
Economic Downturns

Does Systemic Risk in the Financial Sector Predict Future Economic Downturns?

2012 ◽  
Vol 25 (10) ◽  
pp. 3000-3036 ◽  
Author(s):  
Linda Allen ◽  
Turan G. Bali ◽  
Yi Tang
Keyword(s):  
Systemic Risk ◽  
Financial Sector ◽  
Economic Downturns

scholarly journals Measuring the systemic risk in the South African banking sector

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Gregory M. Foggitt ◽  
Andre Heymans ◽  
Gary W. Van Vuuren ◽  
Anmar Pretorius
Keyword(s):  
Financial Crisis ◽  
South African ◽  
Systemic Risk ◽  
Banking Sector ◽  
Risk Index ◽  
Financial Sector ◽  
Ethical Behaviour ◽  
The South ◽  
Case Scenario ◽  
Worst Case

Background: In the aftermath of the sub-prime crisis, systemic risk has become a greater priority for regulators, with the National Treasury (2011) stating that regulators should proactively monitor changes in systemic risk.Aim: The aim is to quantify systemic risk as the capital shortfall an institution is likely to experience, conditional to the entire financial sector being undercapitalised.Setting: We measure the systemic risk index (SRISK) of the South African (SA) banking sector between 2001 and 2013.Methods: Systemic risk is measured with the SRISK.Results: Although the results indicated only moderate systemic risk in the SA financial sector over this period, there were significant spikes in the levels of systemic risk during periods of financial turmoil in other countries. Especially the stock market crash in 2002 and the subprime crisis in 2008. Based on our results, the largest contributor to systemic risk during quiet periods was Investec, the bank in our sample which had the lowest market capitalisation. However, during periods of financial turmoil, the contributions of other larger banks increased markedly.Conclusion: The implication of these spikes is that systemic risk levels may also be highly dependent on external economic factors, in addition to internal banking characteristics. The results indicate that the economic fundamentals of SA itself seem to have little effect on the amount of systemic risk present in the financial sector. A more significant relationship seems to exist with the stability of the financial sectors in foreign countries. The implication therefore is that complying with individual banking regulations, such as Basel, and corporate governance regulations promoting ethical behaviour, such as King III, may not be adequate. It is therefore proposed that banks should always have sufficient capital reserves in order to mitigate the effects of a financial crisis in a foreign country. The use of worst-case scenario analyses (such as those in this study) could aid in determining exactly how much capital banks could need in order to be considered sufficiently capitalised during a financial crisis, and therefore safe from systemic risk.

scholarly journals Fiscal-Monetary-Financial Stability Interactions in a Data-Rich Environment

2018 ◽  
Vol 18 (3) ◽  
pp. 195-224 ◽  
Author(s):  
Martin Hodula ◽  
Lukáš Pfeifer
Keyword(s):  
Monetary Policy ◽  
Systemic Risk ◽  
Financial Stability ◽  
House Prices ◽  
Empirical Support ◽  
Financial Sector ◽  
Economic Policies ◽  
Real Economy ◽  
Monetary Policies ◽  
Fiscal And Monetary Policy

Abstract In this paper, we shed some light on the mutual interplay of economic policy and the financial stability objective. We contribute to the intense discussion regarding the influence of fiscal and monetary policy measures on the real economy and the financial sector. We apply a factor-augmented vector autoregression model to Czech macroeconomic data and model the policy interactions in a data-rich environment. Our findings can be summarized in three main points: First, loose economic policies (especially monetary policy) may translate into a more stable financial sector, albeit only in the short term. In the medium term, an expansion-focused mix of monetary and fiscal policy may contribute to systemic risk accumulation, by substantially increasing credit dynamics and house prices. Second, we find that fiscal and monetary policy impact the financial sector in differential magnitudes and time horizons. And third, we confirm that systemic risk materialization might cause significant output losses and deterioration of public finances, trigger deflationary pressures, and increase the debt service ratio. Overall, our findings provide some empirical support for countercyclical fiscal and monetary policies.

Requirements for Systemic Risk Management in the Financial Sector

2013 ◽  
pp. 882-912 ◽  
Author(s):  
Alan J. King ◽  
Donna N. Dillenberger ◽  
Aviv Orani ◽  
Francis N. Parr ◽  
Gong Su
Keyword(s):  
Risk Management ◽  
Systemic Risk ◽  
Financial Sector

China will press on with financial reform and opening

2018 ◽  
Keyword(s):  
United States ◽  
Emerging Markets ◽  
Central Bank ◽  
Systemic Risk ◽  
Local Governments ◽  
Financial Sector ◽  
The United States ◽  
Financial Reform ◽  
Trade Disputes ◽  
Content Type

Subject Financial reform and opening in China. Significance Despite trade disputes with the United States and risks in emerging markets, China's leaders are showing determination to open the country's financial sector further to foreign businesses. Impacts Local governments and banks will come under pressure from waves of corporate defaults, but wider panic is unlikely. Struggling enterprises will be less able to rely on debt to survive. The strong supervision of the financial sector seen in 2017 will persist as the authorities seek to reduce systemic risk. The precise timeline given by the central bank shows policymakers' confidence that risks are adequately contained.

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