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Cyclical systemic risk and banks’ vulnerability

Author

Listed:
  • Alona Shmygel

    (National Bank of Ukraine)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

What is the impact of cyclical systemic risk on future bank profitability? To answer this question, we study a large panel of Ukrainian banks between 2001 and 2023 comprising systemic events and wartime. With linear local projections we study the impact of cyclical systemic risk on bank profitability and following the original Growth-at-Risk approach we utilize quantile local projections to assess its impact on the tails of the future bank-level profitability distribution. We calibrate the countercyclical capital buffer, develop informative “Bank Capital-at-Risk” and “Share of vulnerable banks” indicators, and conduct scenario analyses and stress tests on profitability and capital adequacy.

Suggested Citation

  • Alona Shmygel & Steven Ongena, 2024. "Cyclical systemic risk and banks’ vulnerability," Swiss Finance Institute Research Paper Series 24-09, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2409
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    More about this item

    Keywords

    systemic risk; linear projections; quantile regressions; bank capital; macroprudential policy;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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