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Asset Commonality in US Banks and Financial Stability

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  • Nicholas Fritsch
  • Jan-Peter Siedlarek

Abstract

One potential threat to a stable financial system is the phenomenon of contagion, where a risk that is ordinarily small becomes a problem because of the way it spreads to other institutions. Researchers have investigated multiple channels through which contagion might occur. We look at two?banks borrowing from each other and banks holding similar types of assets?and argue that the latter is a potential source of systemic risk. We review recent data on asset concentrations and capitalization levels of the largest US banks and conclude that the overall risk from this particular contagion channel is at present likely limited.

Suggested Citation

  • Nicholas Fritsch & Jan-Peter Siedlarek, 2019. "Asset Commonality in US Banks and Financial Stability," Economic Commentary, Federal Reserve Bank of Cleveland, issue January.
    • Handle: RePEc:fip:fedcec:00094
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    References listed on IDEAS

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