Where is the ‘system’ in systemic risk literature?

An automated content analysis of a sample of 65 articles pertaining to the financial system that include the term ‘Systemic Risk’ in their title indicates that there is no consensus on how to define, identify and monitor systemic risk to the financial system. The articles as a whole do not take a systems view in their analyses and proposals, indicating the discipline lacks a useful paradigm. For example, the literature sample primarily addresses the individual system components and how they might be prevented from jeopardising the financial system versus a more forward looking view of what changes to the overall system might make it more resilient. Consequently, policy prescriptions or recommendations based on the existing literature may be too narrowly and institutionally focused to capture the broader requirements necessary for ensuring the sustainability of the financial system. This implies that there is a need for a cross-disciplinary group of regulatory, academic and industry stakeholders focused on supporting the development of a systemic risk discipline. A brief survey of published approaches to modelling systemic risk in the financial system adds depth to the automated content analysis and provides a small example of the ongoing debates.