scholarly journals The Stability of Interbank Market Network: A Perspective on Contagion and Risk Sharing

2016 ◽  
Vol 2016 ◽  
pp. 1-8 ◽  
Author(s):  
Chi Xie ◽  
Yang Liu ◽  
Gang-Jin Wang ◽  
Yan Xu
Keyword(s):  
Commercial Bank ◽  
Systemic Risk ◽  
Commercial Banks ◽  
Risk Sharing ◽  
Main Channel ◽  
Risk Exposure ◽  
Interbank Market ◽  
Bank Of China ◽  
The Stability ◽  
Market Networks

As an important part of the financial system, interbank market provides banks with liquidity and credit lending and also is the main channel for risk contagion. In this paper, we test the existence of systematic risk contagion within the Chinese interbank market. By building the networks of the Chinese interbank market for each year and using the measure of mutual information, we quantitatively detect the changes of interbank market networks and observe that the correlations between banks become increasingly tighter in recent years. With the bilateral risk exposure among Chinese listed commercial banks, we find that the possibility of systemic risk contagion in Chinese interbank market is fairly small. But of great concern on each individual bank, the matter is different. Our simulation shows that the failures of three special banks (i.e., Agricultural Bank of China and Bank of China and Industrial and Commercial Bank of China) most likely lead to systemic risk contagion. Furthermore, we test the antirisk ability of the Chinese interbank market from the perspective of risk sharing and discover that the interbank market is stable when the loss scale is lower than forty percent of banks’ total core capital.

scholarly journals BANK LIQUIDITY RISK: ANALYSIS AND ESTIMATES

2012 ◽  
Vol 10 (2) ◽  
pp. 186-204 ◽  
Author(s):  
Meilė Jasienė ◽  
Jonas Martinavičius ◽  
Filomena Jasevičienė ◽  
Gražina Krivkienė
Keyword(s):  
Risk Management ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Scientific Literature ◽  
Liquidity Risk ◽  
Management Model ◽  
Critical Elements ◽  
Banking Business ◽  
The Stability ◽  
Development Assessment

In today’s banking business, liquidity risk and its management are some of the most critical elements that underlie the stability and security of the bank’s operations, profit-making and clients confidence as well as many of the decisions that the bank makes. Managing liquidity risk in a commercial bank is not something new, yet scientific literature has not focused enough on different approaches to liquidity risk management and assessment. Furthermore, models, methodologies or policies of managing liquidity risk in a commercial bank have never been examined in detail either. The goal of this article is to analyse the liquidity risk of commercial banks as well as the possibilities of managing it and to build a liquidity risk management model for a commercial bank. The development, assessment and application of the commercial bank liquidity risk management was based on an analysis of scientific resources, a comparative analysis and mathematical calculations.

scholarly journals Systemic Risk in the Interbank Market with Overlapping Portfolios

Complexity ◽  
2019 ◽  
Vol 2019 ◽  
pp. 1-12 ◽  
Author(s):  
Shanshan Jiang ◽  
Hong Fan
Keyword(s):  
Interest Rate ◽  
Systemic Risk ◽  
Banking System ◽  
Bipartite Network ◽  
Investment Risk ◽  
Interbank Market ◽  
Operating Rules ◽  
Proposed Model ◽  
The Stability ◽  
The Impact

The increasing frequency and scope of the financial crisis have attracted more attention in the research of the systemic risk of banking system. A new model for the interbank market with overlapping portfolios is proposed to simulate a banking system in this work. The proposed model uses a bipartite network of banks and their assets to analyze the impact of bank investment on the stability of the banking system. In addition, this model introduces investment risk and allows banks to make up for liquidity by selling devaluated assets, which reflects the operating rules of the banking system more realistically. The results show that allowing banks to sell devaluated assets to make up for liquidity can improve the stability of the banking system and the interbank market can also improve the stability of the banking system. For the investment of banks, the investment risk is an uncertain factor that affects the stability of the banking system. The proposed model further analyzes the impact of average investment interest rate, savings interest rate, deposit reserve ratio, and investment asset diversity on the stability of the banking system. The model provides a tool for policy-makers and supervision agencies to prevent the systemic risk of banking system.

scholarly journals Resilience of Interbank Market Networks to Shocks

2011 ◽  
Vol 2011 ◽  
pp. 1-12 ◽  
Author(s):  
Shouwei Li ◽  
Jianmin He
Keyword(s):  
Network Models ◽  
Small World ◽  
Interbank Market ◽  
Small World Networks ◽  
Scale Free ◽  
Scale Free Networks ◽  
Tiered Networks ◽  
The Stability ◽  
Random Shocks ◽  
Market Networks

This paper first constructs a tiered network model of the interbank market. Then, from the perspective of contagion risk, it studies numerically the resilience of four types of interbank market network models to shocks, namely, tiered networks, random networks, small-world networks, and scale-free networks. This paper studies the interbank market with homogeneous and heterogeneous banks and analyzes random shocks and selective shocks. The study reveals that tiered interbank market networks and random interbank market networks are basically more vulnerable against selective shocks, while small-world interbank market networks and scale-free interbank market networks are generally more vulnerable against random shocks. Besides, the results indicate that, in the four types of interbank market networks, scale-free networks have the highest stability against shocks, while small-world networks are the most vulnerable. When banks are homogeneous, faced with selective shocks, the stability of the tiered interbank market networks is slightly lower than that of random interbank market networks, whereas, in other cases, the stability of the tiered interbank market networks is basically between that of random interbank market networks and that of scale-free interbank market networks.

scholarly journals Analysis of China Commercial Banks’ Systemic Risk Sustainability through the Leave-One-Out Approach

2019 ◽  
Vol 12 (1) ◽  
pp. 203 ◽  
Author(s):  
Xiaoming Zhang ◽  
Chunyan Wei ◽  
Stefano Zedda
Keyword(s):  
Theoretical Analysis ◽  
Commercial Bank ◽  
Systemic Risk ◽  
Commercial Banks ◽  
Financial Reform ◽  
Existing Problems ◽  
Regulation And Supervision ◽  
Risk Contribution ◽  
Contagion Risk ◽  
Leave One Out

One of the main issues in the recent Chinese financial reform is aimed at effectively measuring systemic risk and taking appropriate measures to ensure its sustainability and prevent new crises. In this paper, we firstly introduced the present macro-prudential policies implied in China and pointed out the existing problems. Secondly, we analyzed the banks’ assets riskiness and the banks’ probability to default, then, by means of a leave-one-out model, we measured each commercial bank systemic risk contribution. Thirdly, based on comprehensive empirical results and theoretical analysis, we provided some references for macro-prudential regulation and supervision. Results show that systemic risk is increasing in 2013–2017, in particular with reference to contagion risk, with a specific concentration within joint-stock commercial banks, suggesting a specific attention of regulators and supervisors for this category.

scholarly journals TECHNIQUE OF ASSESSMENT OF THE IMPACT OF A REPUTATIONAL RISK ON STABILITY OF COMMERCIAL BANK

2020 ◽  
pp. 18-25
Author(s):  
Екатерина Алексеевна Бибикова ◽  
Ирина Валерьевна Курникова
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Credit Institution ◽  
Reputational Risk ◽  
Reputation Risk ◽  
Using Data ◽  
The Stability ◽  
Relationship Of ◽  
The Impact ◽  
The Relationship

At present, in Russia, when the revocation of licenses from credit organizations continues, the significance of reputational risks is growing sharply. In connection with this subject of research, reputational risk and its influence on maintaining the stability of a credit institution are presented in this article. The aim of the work is to develop a new methodology for assessing the impact of reputation risk on the stability of commercial banks, as well as the practical application of the method using data from a credit institution. As a result of the study, a specific methodology was compiled, which allows you to directly assess the reputation risk in a commercial bank; the relationship of this type of risk and the stability of the credit institution is determined; the methodology has been applied in practice using data from several commercial banks; It is shown how reputation risk can affect the stability of a credit institution. The presented article allows one to determine what is necessary to understand as reputational risk, why the assessment of reputational risk is of the same importance as the assessment of the stability of a credit institution, and what attention should be paid to the leaders of a credit institution so that their bank has a satisfactory level of reputational risk, and therefore , and level of sustainability

Financial penalties and banks’ systemic risk

2018 ◽  
Vol 19 (2) ◽  
pp. 154-173 ◽  
Author(s):  
Hannes Köster ◽  
Matthias Pelster
Keyword(s):  
Systemic Risk ◽  
Fixed Effects ◽  
Banking Sector ◽  
Risk Exposure ◽  
Content Type ◽  
Upper Management ◽  
Positive Effects ◽  
External Monitoring ◽  
The Stability ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of financial penalties on the stability of the banking sector. Design/methodology/approach A unique database of 671 financial penalties imposed on 68 international listed banks between 2007 and 2014 and a fixed-effects panel data approach were used. Findings The results show that financial penalties increase banks’ systemic risk exposure but do not significantly affect banks’ contribution to systemic risk. Additionally, the link between financial penalties and systemic risk exposure is weaker in regulatory and supervisory systems with more prompt corrective power among national authorities. By contrast, supervisory authorities’ stronger power to declare insolvency and a greater external monitoring culture exacerbate the positive effects of financial penalties on systemic risk exposure. Practical implications The punishment of misconduct should correct the social harm and prevent future misconduct while ensuring the banking system’s stability. Therefore, authorities should punish misconduct by implementing penalties against the financial institutions at a specific amount that offsets the damages of misconduct but does not threaten systemic stability. Penalties against institutions may be complemented by financial penalties against upper management to induce a more responsible culture in banks. Originality/value This paper is the first to study the effect of financial penalties on the stability of the financial system. The results contribute to the ongoing debate on the appropriateness of financial penalties and address the question of whether bank regulators reduce or contribute to banks’ systemic risk.

Risk Factors of Collateralized Loan Obligations and Corporate Bonds

2020 ◽  
Vol 32 (6) ◽  
pp. 347-355
Author(s):  
Mark Wahrenburg ◽  
Andreas Barth ◽  
Mohammad Izadi ◽  
Anas Rahhal
Keyword(s):  
Risk Factors ◽  
Risk Factor ◽  
Asset Pricing ◽  
Systemic Risk ◽  
Corporate Bonds ◽  
Risk Exposure ◽  
Expected Returns ◽  
Yield Spreads ◽  
Pricing Factors ◽  
Return Difference

AbstractStructured products like collateralized loan obligations (CLOs) tend to offer significantly higher yield spreads than corporate bonds (CBs) with the same rating. At the same time, empirical evidence does not indicate that this higher yield is reduced by higher default losses of CLOs. The evidence thus suggests that CLOs offer higher expected returns compared to CB with similar credit risk. This study aims to analyze whether this return difference is captured by asset pricing factors. We show that market risk is the predominant risk factor for both CBs and CLOs. CLO investors, however, additionally demand a premium for their risk exposure towards systemic risk. This premium is inversely related to the rating class of the CLO.

scholarly journals Efficiency of Commercial Banking in Developing Countries

Mathematics ◽  
2021 ◽  
Vol 9 (14) ◽  
pp. 1597
Author(s):  
Violeta Cvetkoska ◽  
Katerina Fotova Čiković ◽  
Marija Tasheva
Keyword(s):  
Developing Countries ◽  
Commercial Banks ◽  
Feasible Solution ◽  
Banking System ◽  
Efficiency Score ◽  
Commercial Banking ◽  
Real Situation ◽  
Super Efficiency ◽  
Bank Management ◽  
The Stability

The aim of this paper is to evaluate the relative efficiency of commercial banks in three developing countries in Europe (North Macedonia, Serbia, and Croatia) in the period from 2015 to 2019, and to provide targets for improvement for the inefficient banks by using DEA. The variables are selected under the income-based approach. Based on the output-oriented BCC model, unusual results are obtained for a few commercial banks in each country, that is, they are BCC relative efficient, which is contrary to the real situation. In order to identify outliers that can affect the efficiency results, a super-efficiency procedure is applied so that banks with a super-efficiency score higher than 1.2 (outliers) or for which a feasible solution was not found are considered in detail and removed, and then the output-oriented BCC model is rerun. Based on the obtained results, the Macedonian commercial banking system shows the highest efficiency (91.1%), followed by the Croatian (90.9%) and the Serbian (81.9%) banking system. The estimated targets for improvement of the inefficient commercial banks could help their top bank management in better resource allocation and making fact-based and faster decisions by which they can improve the operation of the banks they lead and contribute to the stability of the financial system.

Sign in / Sign up

Export Citation Format

Share Document