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Banking System Vulnerability: Annual Update

Author

Listed:
  • Kristian S. Blickle
  • Fernando M. Duarte
  • Thomas M. Eisenbach
  • Anna Kovner

Abstract

A key part of understanding the stability of the U.S. financial system is to monitor leverage and funding risks in the financial sector and the way in which these vulnerabilities interact to amplify negative shocks. In this post, we provide an update of four analytical models, introduced in a Liberty Street Economics post last year, that aim to capture different aspects of banking system vulnerability. Since their introduction, vulnerabilities as indicated by these models have increased moderately, continuing the slow but steady upward trend that started around 2016. Despite the recent increase, the overall level of vulnerabilities according to this analysis remains subdued and is still significantly smaller than before the financial crisis of 2008-09.

Suggested Citation

  • Kristian S. Blickle & Fernando M. Duarte & Thomas M. Eisenbach & Anna Kovner, 2019. "Banking System Vulnerability: Annual Update," Liberty Street Economics 20191218, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:86690
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    More about this item

    Keywords

    Liberty Street Economics; fire sale vulnerability; liquidity mismatch; CLASS model; banking system vulnerability;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G0 - Financial Economics - - General
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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