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Systemic risk and the optimal seniority structure of banking liabilities

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  • Spiros Bougheas
  • Alan Kirman

Abstract

The paper argues that systemic risk must be taken into account when designing optimal bankruptcy procedures in general, and priority rules in particular. Allowing for endogenous formation of links in the interbank market, we show that the optimal policy depends on the distribution of shocks and the severity of fire sales.

Suggested Citation

  • Spiros Bougheas & Alan Kirman, 2018. "Systemic risk and the optimal seniority structure of banking liabilities," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 47-54, January.
    • Handle: RePEc:wly:ijfiec:v:23:y:2018:i:1:p:47-54
    DOI: 10.1002/ijfe.1602
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    Cited by:

    1. Baumöhl, Eduard & Bouri, Elie & Hoang, Thi-Hong-Van & Shahzad, Syed Jawad Hussain & Výrost, Tomáš, 2020. "Increasing systemic risk during the Covid-19 pandemic: A cross-quantilogram analysis of the banking sector," EconStor Preprints 222580, ZBW - Leibniz Information Centre for Economics.
    2. Padellini, Mauro, 2021. "Balance sheet and seniority constraints on the repayment value of claims," MPRA Paper 107295, University Library of Munich, Germany.
    3. Eboli, Mario, 2025. "Systemic risk in centralised interbank networks," Journal of Financial Stability, Elsevier, vol. 81(C).
    4. Liang Liu & Hang Le & Steve Thompson, 2022. "CEO overconfidence and bank systemic risk: Evidence from U.S. bank holding companies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 2977-2996, July.
    5. Spiros Bougheas & Alan Kirman, 2016. "Bank Insolvencies, Priority Claims and Systemic Risk," Lecture Notes in Economics and Mathematical Systems, in: Pasquale Commendatore & Mariano Matilla-García & Luis M. Varela & Jose S. Cánovas (ed.), Complex Networks and Dynamics, pages 195-208, Springer.
    6. Altavilla, Carlo & Fernandes, Cecilia Melo & Ongena, Steven & Scopelliti, Alessandro, 2022. "Bank bond holdings and bail-in regulatory changes: evidence from euro area security registers," Working Paper Series 2758, European Central Bank.
    7. Padellini, Mauro, 2021. "Balance sheet and seniority constraints on the repayment value of claims," MPRA Paper 107256, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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