Short-Term Wholesale Funding and Systemic Risk
AbstractIn this paper we identify some of the main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find no evidence that a larger size increases systemic risk within the class of large global banks. We also show that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee''s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 12/46.
Date of creation: 01 Feb 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-BAN-2012-03-21 (Banking)
- NEP-CBA-2012-03-21 (Central Banking)
- NEP-RMG-2012-03-21 (Risk Management)
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