On bank credit risk: systemic or bank-specific? Evidence from the US and UK
AbstractWe develop a multivariate credit risk model that accounts for joint defaults of banks and al-lows us to disentangle how much of banks' credit risk is systemic. We find that the US and UK dif-fer not only in the evolution of systemic risk, but in particular in their banks' systemic exposures. In both countries, however, systemic credit risk varies substantially, represents about half of total bank credit risk on average, and induces high risk premia. Further, the results suggest that sovereign and bank systemic risk are particularly interlinked in the UK.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 951.
Date of creation: Feb 2014
Date of revision:
systemic bank credit Risk; credit default swaps; distress risk premia; Bayesian estimation;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-08 (All new papers)
- NEP-BAN-2014-03-08 (Banking)
- NEP-CBA-2014-03-08 (Central Banking)
- NEP-RMG-2014-03-08 (Risk Management)
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