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Contagion risk for Australian banks from global systemically important banks: Evidence from extreme events

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  • Akhter, Selim
  • Daly, Kevin

Abstract

This paper presents evidence that extreme negative shocks for the global systemically important banks (GSIBs) are contagious to Australian banks. Our logit regression models predict transmission of adverse extreme shocks in the distance to default (DD) of GSIBs to the Australian banks. While most previous studies consider contagion across national stock markets, we investigate the degree of contagion risk for Australian banks spreading from GSIBs. Our results point to the critical importance for the Australian Prudential Regulation Authority (APRA) (2015) to closely observe and monitor developments across the major GSIBs and direct appropriate local policy measures accordingly.

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  • Akhter, Selim & Daly, Kevin, 2017. "Contagion risk for Australian banks from global systemically important banks: Evidence from extreme events," Economic Modelling, Elsevier, vol. 63(C), pages 191-205.
    • Handle: RePEc:eee:ecmode:v:63:y:2017:i:c:p:191-205
    DOI: 10.1016/j.econmod.2016.11.018
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    More about this item

    Keywords

    Global systemically important banks (GSIBs); Australian banks; Extreme value theory (EVT); Extreme events; Distance to default (DD); GARCH; Logistic regression model;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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