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Financial Stability Paper No 2: A New Approach to Assessing Risks to Financial Stability

Author

Listed:
  • Haldane, Andrew

    (Bank of England)

  • Hall, Simon

    (Bank of England)

  • Pezzini, Silvia

    (Bank of England)

Abstract

The Bank’s July 2006 Financial Stability Report (FSR) included a new approach to assessing risks to the stability of the UK financial system. This paper explains the methodology and analysis behind this work and outlines what is being done to improve and extend it. Section 1 of the paper sets out the conceptual rationale for this approach. Section 2 describes its practical implementation in the July 2006 FSR, with further detail on methodology provided in a series of annexes. Section 3 concludes by discussing how this framework is being developed over time to improve the analysis of risks to the UK financial system and to strengthen the management of these risks by the financial sector.

Suggested Citation

  • Haldane, Andrew & Hall, Simon & Pezzini, Silvia, 2007. "Financial Stability Paper No 2: A New Approach to Assessing Risks to Financial Stability," Bank of England Financial Stability Papers 2, Bank of England.
    • Handle: RePEc:boe:finsta:0002
    Note: http://www.bankofengland.co.uk/financialstability/Pages/fpc/fspapers/fs_paper02.aspx
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-paper/2007/a-new-approach-to-assessing-risks-to-financial-stability
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    References listed on IDEAS

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    1. Richard N. Cooper, 2006. "Understanding global imbalances," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 51.
    2. Mathias Drehmann & Steffen Sorensen & Marco Stringa, 2008. "The integrated impact of credit and interest rate risk on banks: an economic value and capital adequacy perspective," Bank of England working papers 339, Bank of England.
    3. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
    4. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    5. Hausmann, Ricardo & Sturzenegger, Federico, 2006. "Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations," Working Paper Series rwp06-003, Harvard University, John F. Kennedy School of Government.
    6. Nier, Erlend & Yang, Jing & Yorulmazer, Tanju & Alentorn, Amadeo, 2007. "Network models and financial stability," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2033-2060, June.
    7. Rodrigo Cifuentes & Hyun Song Shin & Gianluigi Ferrucci, 2005. "Liquidity Risk and Contagion," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 556-566, 04/05.
    8. John Whitley & Richard Windram, 2003. "A quantitative framework for commercial property and its relationship to the analysis of the financial stability of the corporate sector," Bank of England working papers 207, Bank of England.
    9. Martin Cihak, 2006. "How Do Central Banks Writeon Financial Stability?," IMF Working Papers 06/163, International Monetary Fund.
    10. Allen, William A. & Wood, Geoffrey, 2006. "Defining and achieving financial stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 152-172, June.
    11. Philip Bunn & Garry Young, 2004. "Corporate capital structure in the United Kingdom: determinants and adjustment," Bank of England working papers 226, Bank of England.
    12. Marco Sorge, 2004. "Stress-testing financial systems: an overview of current methodologies," BIS Working Papers 165, Bank for International Settlements.
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    Cited by:

    1. repec:bis:bisifc:45-06 is not listed on IDEAS
    2. Noor-e-Saher & Mehran Herbert, 2010. "Response of Long-term Interest Rate to Fiscal Imbalance: Evidence from Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 6, pages 43-49.
    3. Murat Cakir, 2017. "A conceptual design of "what and how should a proper macro-prudential policy framework be?" A globalistic approach to systemic risk and procuring the data needed," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45 Bank for International Settlements.
    4. repec:eee:finsta:v:33:y:2017:i:c:p:261-272 is not listed on IDEAS
    5. Derek Anderson & Benjamin L Hunt & Stephen Snudden, 2013. "Fiscal Consolidation in the Euro Area; How Much Can Structural Reforms Ease the Pain?," IMF Working Papers 13/211, International Monetary Fund.
    6. Benford, James & Nier, Erlend, 2007. "Financial Stability Paper No 3: Monitoring Cyclicality of Basel II Capital Requirements," Bank of England Financial Stability Papers 3, Bank of England.
    7. Pavel Kapinos & Oscar A. Mitnik, 2016. "A Top-down Approach to Stress-testing Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 229-264, June.
    8. Jim Wilkinson & Kenneth Spong & Jon Christensson, 2010. "Financial stability reports: how useful during a financial crisis?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 41-70.
    9. Giuseppe Mastromatteo & Giuseppe Mastromatteo, 2016. "Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework," Economics Working Paper Archive wp_875, Levy Economics Institute.
    10. Gou, Qin & Yiping, Huang, 2018. "Will Financial Liberalization Trigger the First Crisis in the People’s Republic of China? Lessons from Cross-Country Experiences," ADBI Working Papers 818, Asian Development Bank Institute.
    11. Tao Sun, 2015. "The Impact of Global Liquidity on Financial Landscapes and Risks in the ASEAN-5 Countries," IMF Working Papers 15/211, International Monetary Fund.

    More about this item

    Keywords

    Assessing Risks;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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