scholarly journals Contagion Risks and Systemic Stability in Financial Networks

2021 ◽  
Vol 2021 ◽  
pp. 1-9
Author(s):  
Jingqian Tian ◽  
Chao Wang ◽  
Xiaoxing Liu ◽  
Longmiao Qiu
Keyword(s):  
Systemic Risk ◽  
Utility Maximization ◽  
Banking System ◽  
System Stability ◽  
Financial Networks ◽  
Investment Strategies ◽  
Monetary Policies ◽  
Agent Based ◽  
Positive Effects ◽  
Regulatory Interventions

An agent-based model is proposed, constructing an evolutionary banking system, where interbank loans and investment strategies are, respectively, determined by liquidity shortage and utility maximization. The causes of systemic risk are then explored based on the evolutionary banking system, which is calibrated by a sample from China. The regulatory interventions indicate the positive effects of increased investment assets, while the negative but inappreciable effects of increased interbank counterparties on contagion risks decrease. This observation hints at the possibility of promoting systemic stability by incentivizing more diversifications in investment assets instead of interbank counterparties. The results also demonstrate the advantages of prudential liquidity requirements, interbank liquidity facilities, and monetary policies from the central bank in promoting banking system stability.

Banking

2019 ◽  
pp. lii-36
Author(s):  
Allen N. Berger ◽  
Philip Molyneux ◽  
John O. S. Wilson
Keyword(s):  
Systemic Risk ◽  
Financial Literacy ◽  
Global Financial Crisis ◽  
Banking System ◽  
System Stability ◽  
Real Economy ◽  
Research Themes ◽  
The Us ◽  
The Global Financial Crisis ◽  
Operational Issues

A lot has happened in the ten years since the global financial crisis. This chapter starts with a summary of key regulatory and operational issues that have impacted banks in Europe, the US and elsewhere. Banks are much more heavily regulated than pre-crisis, their performance in the US and Europe has been subdued although there are signs that those in the former have turned the corner. There continues also to be ongoing discussion as well as regulatory efforts to improve banking system stability with new rules on capital, liquidity, bailouts, and bail-ins to be fully completed. These issues are covered in the first part of the chapter. We then move on to discuss emerging research themes covering areas including: banks and their impact on the real economy; capital, liquidity, and tax regulation; systemic risk; unconventional monetary policy; FinTech; bank governance and culture; financial consumer protection and financial literacy; and finally financial inclusion. The final part of the chapter provides summaries of all the chapters in the Handbook.

scholarly journals Non-Traditional Systemic Risk Contagion within the Chinese Banking Industry

2021 ◽  
Vol 13 (14) ◽  
pp. 7954
Author(s):  
Tonmoy Choudhury ◽  
Simone Scagnelli ◽  
Jaime Yong ◽  
Zhaoyong Zhang
Keyword(s):  
Systemic Risk ◽  
Banking Sector ◽  
Banking Industry ◽  
Risk Measures ◽  
Banking System ◽  
Policy Implications ◽  
System Stability ◽  
Chinese Banking Industry ◽  
Contagion Risk ◽  
Chinese Banking

Systemic risk contagion is a key issue in the banking sector in maintaining financial system stability. This study is among the first few to use three different distance-to-risk measures to empirically assess the domestic interbank linkages and systemic contagion risk of the Chinese banking industry, by using bivariate dynamic conditional correlation GARCH model on data collected from eight prominent Chinese banks for the period 2006–2018. The results show a relatively high correlation among almost all the banks, suggesting an interconnectedness among the banks. We found evidence that the banking system is exposed to significant domestic contagion risks arising from systemic defaults. Given that Chinese markets deliver weak signals of forthcoming stress in banking sectors, new policy intervention is crucial to resolve the hidden stress in the system. The results have important policy implications and will provide scholars and policymakers further insight into the risk contagion originating from interbank networks.

scholarly journals On the Unsustainable Macroeconomy with Increasing Inequality of Firms Induced by Excessive Liquidity

2019 ◽  
Vol 11 (11) ◽  
pp. 3075
Author(s):  
Wenzhi Zheng ◽  
Yuting Lou ◽  
Yu Chen
Keyword(s):  
Economic Performance ◽  
Systemic Risk ◽  
Large Scale ◽  
Risk Measurement ◽  
Economic Crises ◽  
Monetary Policies ◽  
Leverage Ratio ◽  
Agent Based ◽  
Two Factors ◽  
Production Cycles

This research studies how excessive liquidity can trigger catastrophic economic crises in a stylized macroeconomic agent-based model (ABM). Previous studies showed the relevance of the income distribution to the economic crises, whereas we find, in a well-studied macroeconomic ABM endowed with diverse economic performance of firms, while providing moderate liquidity serves as an effective tool to stabilize the economy, excessive liquidity may cause abnormal dispersion of firm’s wealth and the subsequent severe endogenous crises. The mechanism for such large-scale crises is found in the model as the increasing gap of financial fagility between the advantageous and disadvantageous groups of firms. Two factors, diverse production cycles and variable wages, are used to explore the robustness of the occurrence of crises. Moreover, our study shows that the leverage ratio based on aggregate values may underestimate the systemic risk. Hence, a proposal for the new design of the risk measurement in the macro-economy and insights into monetary policies for a sustainable economic development is given.

Income Diversification and Bank Efficiency in Vietnam

2017 ◽  
pp. 52-67
Author(s):  
Sang Nguyen Minh
Keyword(s):  
Regression Model ◽  
Commercial Banks ◽  
Banking System ◽  
Operational Efficiency ◽  
Commercial Banking ◽  
Tobit Regression ◽  
Income Diversification ◽  
Positive Effects ◽  
Study Results ◽  
The Impact

This study uses the DEA (Data Envelopment Analysis) method to estimate the technical efficiency index of 34 Vietnamese commercial banks in the period 2007-2015, and then it analyzes the impact of income diversification on the operational efficiency of Vietnamese commercial banks through a censored regression model - the Tobit regression model. Research results indicate that income diversification has positive effects on the operational efficiency of Vietnamese commercial banks in the research period. Based on study results, in this research some recommendations forpolicy are given to enhance the operational efficiency of Vietnam’s commercial banking system.

scholarly journals Early warning of systemic risk in global banking: eigen-pair R number for financial contagion and market price-based methods

2021 ◽  
Author(s):  
Sheri Markose ◽  
Simone Giansante ◽  
Nicolas A. Eterovic ◽  
Mateusz Gatkowski
Keyword(s):  
Early Warning ◽  
Systemic Risk ◽  
Value At Risk ◽  
Risk Measures ◽  
Market Price ◽  
System Stability ◽  
Conditional Value At Risk ◽  
Centrality Measures ◽  
Global Banking ◽  
Pair Method

AbstractWe analyse systemic risk in the core global banking system using a new network-based spectral eigen-pair method, which treats network failure as a dynamical system stability problem. This is compared with market price-based Systemic Risk Indexes, viz. Marginal Expected Shortfall, Delta Conditional Value-at-Risk, and Conditional Capital Shortfall Measure of Systemic Risk in a cross-border setting. Unlike paradoxical market price based risk measures, which underestimate risk during periods of asset price booms, the eigen-pair method based on bilateral balance sheet data gives early-warning of instability in terms of the tipping point that is analogous to the R number in epidemic models. For this regulatory capital thresholds are used. Furthermore, network centrality measures identify systemically important and vulnerable banking systems. Market price-based SRIs are contemporaneous with the crisis and they are found to covary with risk measures like VaR and betas.

scholarly journals A Digital Currency Architecture for Privacy and Owner-Custodianship

2021 ◽  
Vol 13 (5) ◽  
pp. 130
Author(s):  
Geoffrey Goodell ◽  
Hazem Danny Al-Nakib ◽  
Paolo Tasca
Keyword(s):  
Systemic Risk ◽  
Banking System ◽  
Developed Countries ◽  
Fractional Reserve Banking ◽  
Point Of Sale ◽  
Digital Currency ◽  
Fractional Reserve ◽  
Banking Relationships ◽  
Reserve Banking ◽  
Payment Mechanisms

In recent years, electronic retail payment mechanisms, especially e-commerce and card payments at the point of sale, have increasingly replaced cash in many developed countries. As a result, societies are losing a critical public retail payment option, and retail consumers are losing important rights associated with using cash. To address this concern, we propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both e-commerce purchases and point-of-sale purchases that are required to be cashless. Our proposal introduces a government-backed, privately-operated digital currency infrastructure to ensure that every transaction is registered by a bank or money services business, and it relies upon non-custodial wallets backed by privacy-enhancing technology, such as blind signatures or zero-knowledge proofs, to ensure that transaction counterparties are not revealed. Our approach to digital currency can also facilitate more efficient and transparent clearing, settlement, and management of systemic risk. We argue that our system can restore and preserve the salient features of cash, including privacy, owner-custodianship, fungibility, and accessibility, while also preserving fractional reserve banking and the existing two-tiered banking system. We also show that it is possible to introduce regulation of digital currency transactions involving non-custodial wallets that unconditionally protect the privacy of end-users.

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