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Systemic risk contributions

In: Macroprudential regulation and policy

  • Xin Huang

    (University of Oklahoma)

  • Hao Zhou

    (Federal Reserve Board)

  • Haibin Zhu

    (Bank for International Settlements)

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We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks' marginal contributions to the systemic risk. The methodology is applied using publicly available data to the 19 bank holding companies covered by the U.S. Supervisory Capital Assessment Program (SCAP), with the systemic risk indicator peaking around $1.1 trillion in March 2009. Our systemic risk contribution measure shows interesting similarity to and divergence from the SCAP expected loss measure. In general, we find that a bank's contribution to the systemic risk is roughly linear in its default probability but highly nonlinear with respect to institution size and asset correlation.

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This chapter was published in:
  • Bank for International Settlements, 2011. "Macroprudential regulation and policy," BIS Papers, Bank for International Settlements, number 60, October.
  • This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 60-05.
    Handle: RePEc:bis:bisbpc:60-05
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