Measuring Systemic Risk And Financial Linkages In The Thai Banking System
This paper addresses the measurement issues of systemic risk in the Thai banking sector. The concept of conditional value-at-risk (CoVaR), due to Adrian and Brunnermeier (2008), was used to quantify the level of systemic risk and financial linkages among six major Thai commercial banks over the period of 1996Q2-2009Q1. Intuitively, CoVaR measures the degree of ‘risk externalities’ that a single institution imposes on the system. We found that there was additional risk imposed onto the overall system by individual banks, both during the Asian crisis time and in subsequent periods. There is some evidence that larger banks contribute more to this systemic risk, as measured by the concept of “?CoVaR,” but size is far from being a dominant factor. We further apply the concept of CoVaR to measure the financial linkage between any two banks and investigate the changing nature of the linkages over time as well as other bank characteristics that drive such inter-bank relationships. These measures of risk externalities serve as a useful additional toolbox to the regulators, and themselves have novel regulatory implications.
|Date of creation:||26 Feb 2010|
|Contact details of provider:|| Postal: 273 Samsen Road, Bangkhunprom, Bangkok|
Phone: (662) 283-5353
Fax: (662) 280-0449
Web page: http://www.bot.or.th/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus Staub, 1998. "Inter-Banken-Kredite und systemisches Risiko," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(II), pages 193-230, June.
- Ben Cohen & Eli Remolona, 2008. "The Unfolding Turmoil of 2007–2008: Lessons and Responses," RBA Annual Conference Volume,in: Paul Bloxham & Christopher Kent (ed.), Lessons from the Financial Turmoil of 2007 and 2008 Reserve Bank of Australia.
- Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, July.
- Alan D. Morrison, 2005. "Credit Derivatives, Disintermediation, and Investment Decisions," The Journal of Business, University of Chicago Press, vol. 78(2), pages 621-648, March.
- Benmelech, Efraim & Dlugosz, Jennifer, 2009.
"The alchemy of CDO credit ratings,"
Journal of Monetary Economics,
Elsevier, vol. 56(5), pages 617-634, July.
- Efraim Benmelech & Jennifer Dlugosz, 2009. "The Alchemy of CDO Credit Ratings," NBER Working Papers 14878, National Bureau of Economic Research, Inc.
- Gianni De Nicolo & Myron L. Kwast, 2001. "Systemic risk and financial consolidation: are they related?," Finance and Economics Discussion Series 2001-33, Board of Governors of the Federal Reserve System (U.S.).
- Jan Kregel, 2008. "Using Minsky's Cushions of Safety to Analyze the Crisis in the U. S. Subprime Mortgage Market," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 37(1), pages 3-23, April.
- Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-762, November.
- Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
- Martin Hellwig, 1995. "Systemic Aspects of Risk Management in Banking and Finance," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(IV), pages 723-737, December.
- Robert A. Eisenbeis, 1997. "International settlements: a new source of systemic risk?," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 44-50.
- Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-419, June.
- Alan Morrison, 2000. "Credit Derivatives, Disintermediation and Investment Decisions," OFRC Working Papers Series 2001fe01, Oxford Financial Research Centre. Full references (including those not matched with items on IDEAS)