Testimony of Hilary J. Allen, House Subcommittee on Consumer Protection and Financial Institutions Hearing on “Addressing Climate as a Systemic Risk: The Need to Build Resilience within Our Banking and Financial System”

2021 ◽  
Author(s):  
Hilary J. Allen
Keyword(s):  
Financial Institutions ◽  
Consumer Protection ◽  
Systemic Risk ◽  
Financial System

scholarly journals Interconnectedness and systemic risk measures of Chinese financial institutions

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ming Qi ◽  
Jiawei Zhang ◽  
Jing Xiao ◽  
Pei Wang ◽  
Danyang Shi ◽  
...  
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Risk Measures ◽  
Financial System ◽  
Vulnerability Index ◽  
Content Type ◽  
Systemic Risks ◽  
Impact Index ◽  
Systemic Impact ◽  
Potential Risks

PurposeIn this paper the interconnectedness among financial institutions and the level of systemic risks of four types of Chinese financial institutions are investigated.Design/methodology/approachBy the means of RAS algorithm, the interconnection among financial institutions are illustrated. Different methods, including Linear Granger, Systemic impact index (SII), vulnerability index (VI), CoVaR, and MES are used to measure the systemic risk exposures across different institutions.FindingsThe results illustrate that big banks are more interconnected and hold the biggest scales of inter-bank transactions in the financial network. The institutions which have larger size tend to have more connection with others. Insurance and security companies contribute more to the systemic risk where as other institutions, such as trusts, financial companies, etc. may bring about severe loss and endanger the financial system as a whole.Practical implicationsSince other institutions with low levels of regulation may bring about higher extreme loss and suffer the whole system, it deserves more attention by regulators considering the contagion of potential risks in the financial system.Originality/valueThis study builds a valuable contribution by examine the systemic risks from the perspectives of both interconnection and tail risk measures. Furthermore; Four types financial institutions are investigated in this paper.

scholarly journals Measuring Systemic Risk of Banking in Indonesia: Conditional Value at Risk Model Application

2017 ◽  
Vol 6 (2) ◽  
pp. 301-318
Author(s):  
Harjum Muharam ◽  
Erwin Erwin
Keyword(s):  
At Risk ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Value At Risk ◽  
Risk Model ◽  
Financial System ◽  
Conditional Value At Risk ◽  
Spearman Correlation ◽  
Weak Correlation ◽  
Model Application

Systemic risk is a risk of collapse of the financial system that would cause the financial system is not functioning properly. Measurement of systemic risk in the financial institutions, especially banks are crucial, because banks are highly vulnerable to financial crisis. In this study, to estimate the conditional value-at-risk (CoVaR) used quantile regression. Samples in this study of 9 banks have total assets of the largest in Indonesia. Testing the correlation between VaR and ΔCoVaR in this study using Spearman correlation and Kendall's Tau. There are five banks that have a significant correlation between VaR and ΔCoVaR, meanwhile four others banks in the sample did not have a significant correlation. However, the correlation coefficient is below 0.50, which indicates that there is a weak correlation between VaR and CoVaR.DOI: 10.15408/sjie.v6i2.5296

scholarly journals Systemic Risk and Stability in Financial Networks

2015 ◽  
Vol 105 (2) ◽  
pp. 564-608 ◽  
Author(s):  
Daron Acemoglu ◽  
Asuman Ozdaglar ◽  
Alireza Tahbaz-Salehi
Keyword(s):  
Phase Transition ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Financial Networks ◽  
Financial Contagion ◽  
Financial Network

This paper argues that the extent of financial contagion exhibits a form of phase transition: as long as the magnitude of negative shocks affecting financial institutions are sufficiently small, a more densely connected financial network (corresponding to a more diversified pattern of interbank liabilities) enhances financial stability. However, beyond a certain point, dense interconnections serve as a mechanism for the propagation of shocks, leading to a more fragile financial system. Our results thus highlight that the same factors that contribute to resilience under certain conditions may function as significant sources of systemic risk under others. (JEL D85, E44, G21, G28, L14)

Financial Stability, Systemic Risk, and Taxpayers’ Money—The Rationale for a Special Resolution Regime

2016 ◽  
Author(s):  
Michael Schillig
Keyword(s):  
Moral Hazard ◽  
Market Efficiency ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
System Stability ◽  
Cross Border ◽  
Ex Post ◽  
Ex Ante

Special resolution regimes are generally introduced with the objective of helping to ‘maintain financial stability, minimize systemic risk, protect consumers, limit moral hazard and promote market efficiency’. The recurring themes are financial stability, systemic risk, and taxpayers’ exposure to losses. This chapter explores whether and to what extent a special resolution regime for banks and financial institutions can contribute to the enhancement of financial (system) stability and can limit systemic risk. It seeks to clarify these concepts and discusses possible ex ante incentives that a (recovery and) resolution regime may provide for controlling systemic risk. Further, it focuses on ex post remedies for the curtailment of systemic risk, and considers the international and cross-border implications.

scholarly journals Systemic risks for investments under global uncertainty

2020 ◽  
Keyword(s):  
Comparative Analysis ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Business Models ◽  
Financial System ◽  
Systemic Risks ◽  
Key Features ◽  
Global Uncertainty ◽  
The Impact ◽  
Global Financial System

Under growing uncertainty and interdependence, systemic risks are essential for the effective functioning of the global financial system. Therefore, the subject of the proposed study is systemic risks for the global financial system. The goal of this work is to identify and disclose the role of systemic risks in carrying out investment activities. The article solves the following objectives: to identify and reveal key features and characteristics of systemic risks, to identify new challenges in systemic risk management, to identify new manifestations of systemic risks. To achieve the goal of the study, the following methods are used: system-structural, synergetic, method of comparative analysis, method of analysis and synthesis. The study reveals the following results. The main approaches to defining the concept of systemic risks are identified and their comparative analysis is carried out. The main approaches to measuring systemic risks and measurement criteria are identified. The differences between the concepts of systemic and systematic risk are revealed, and the mechanism of their interrelation is identified. New systemic risks in the conditions of global uncertainty are identified. The impact of the COVID-19 pandemic on systemic risks is determined. The main new types of risks and threats to financial stability in the long run are identified. The main directions of response of financial regulatory bodies to new systemic risks are determined. The main effects of the impact of measures to stimulate economic growth on the state of financial markets and investment activities are identified. The conclusions of the study are as follows. It is determined that there is no unanimous definition of systemic risk. Key features of systemic risks are identified, such as unpredictability, large-scale impact, spillover effect, impact on the real sector of the economy, etc. It is determined that when measuring systemic risk there are two problems: the measure of quantitative expression of systemic risk as a unit and the distribution of systemic risk between individual financial institutions. It is revealed that systemic risk can be a source of systematic risks. The COVID-19 pandemic, as an extraordinary macroeconomic shock, is belived to lead to new systemic risks. It is revealed that new types of systemic risks include, in particular, default risks, complexity of the macroeconomic environment, risks of sovereign financing, risk of lack of liquidity. The impact of new systemic risks on investment activities is revealed, in particular, changes in the business models of financial institutions, changes in the strategies of investment funds, lower ratings of debt securities, increasing the cost of debt financing, lack of liquidity.

Macroprudential Policy Instruments of Central Banks

2012 ◽  
pp. 32-47
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Policy Instruments ◽  
Central Banks ◽  
Macroprudential Policy ◽  
Policy Studies ◽  
The Future ◽  
Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

Critical Analysis of the Zero Risk Weight Privilege for European Sovereign Debt in Light of Art. 124 TFEU

2020 ◽  
Vol 17 (1) ◽  
Author(s):  
Patrick Hauser
Keyword(s):  
Financial Institutions ◽  
Sovereign Debt ◽  
Banking System ◽  
Financial System ◽  
Significant Risk ◽  
Capital Adequacy ◽  
Individual Member ◽  
Member States ◽  
The Individual ◽  
Credit Institutions

AbstractThe zero risk weight privilege for European sovereign debt in the current capital adequacy requirements for credit institutions incentivises credit institutions to acquire and hold sovereign debt. However, it also poses a significant risk to the stability of the banking system and thus the financial system as a whole. It is argued that this privilege should not only be abolished due to the risk it entails but that it is also non conformant with EU primary law. Art. 124 TFEU prohibits privileged access of the EU and Member States' public sector to financial institutions except for prudential considerations. The protective purpose of Art. 124 TFEU to ensure sound budgetary policies by subjecting public borrowing to the same rules as borrowing by other market participants is thwarted by the uniform zero risk weight privilege. Further, as this privilege does not take into account the varying creditworthiness of the individual Member States it does not promote the soundness of financial institutions so as to strengthen the soundness of the financial system as whole, but rather endangers systemic stability. The zero risk weight privilege is therefore not based on prudential considerations and hence violates Art. 124 TFEU.

Sign in / Sign up

Export Citation Format

Share Document