scholarly journals Systemic risk in the banking system: measuring and interpreting the results

2019 ◽  
Vol 14 (3) ◽  
pp. 34-47
Author(s):  
Olena Bezrodna ◽  
Zoia Ivanova ◽  
Yulia Onyshchenko ◽  
Volodymyr Lypchanskyi ◽  
Serhii Rymar
Keyword(s):  
Systemic Risk ◽  
Financial Risk ◽  
Banking System ◽  
Cumulative Effect ◽  
Risk Indicators ◽  
Risk Indicator ◽  
Regime Types ◽  
Systemic Crisis ◽  
Integral Assessment ◽  
Systemically Important Banks

Highly concentrated banking system risks and the cumulative effect due to their accumulation act as a driver for improving the macro-prudential policy implemented by central banks. For this reason, an effectively and comprehensively assessed systemic risk in the banking system is declared an express condition for the early detection of its production sources and blocking of potential spreading channels, reducing the possible implementation. In light of this, the article develops an approach to the aggregated systemic risk assessment and interpretation of its results. The proposed approach is based on the considered influence exerted by financial risks of systemically important banks on the destabilized banking system and interconnections between banks in the context of the possible crisis impulse spreading. The following steps should be accomplished to form an aggregated systemic risk indicator in the banking system. Firstly, the differentiation of systemically important banks by the degree of their systemic importance; secondly, an integral assessment of the bank operation riskiness within certain bank groups; thirdly, the cumulative composition of the corresponding integral indicators, taking into account their weighting coefficients based on two criteria, namely values of the systemic importance indicator differentiating the bank groups, and the correlation of their risks. Interpreting the quantitative measurement results with regard to the systemic risk in the banking system is followed by the recommendations below: the systemic risk grading into high, medium and low levels and the respective definition of the threshold aggregated systemic risk indicator value which informs about the possible systemic crisis when approached; justification of the selected supervision regime types (strengthened, moderate or weakened) for systemically important banks, depending on the riskiness level specific for their operation and the systemic importance degree. The developed approach to measuring the systemic risk by means of constructing an aggregated indicator and interpreting the obtained results was being tested considering the financial risk indicators of the systemically important banks in Ukraine during 2009–2018.

scholarly journals Measurement of Systemic Risk in a Common European Union Risk-Based Deposit Insurance System: Formal Necessity or Value-Adding Process?

Risks ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 137 ◽  
Author(s):  
Aida Barkauskaite ◽  
Ausrine Lakstutiene ◽  
Justyna Witkowska
Keyword(s):  
European Union ◽  
Systemic Risk ◽  
Deposit Insurance ◽  
Current System ◽  
Banking System ◽  
Risk Indicators ◽  
Insurance Fund ◽  
Insurance System ◽  
Deposit Insurance System ◽  
The Stability

Scientific discussions have emphasized that the main problem with the current deposit insurance system is that the current system does not evaluate the risks that banks assume to calculate the deposit insurance premiums in many countries of the European Union (E.U.). Thus, the prevailing system does not safeguard a sufficient level of stability in the banking system. Scientific studies show that the deposit insurance system should consider not only the risk indicators for individual banks, but it must also consider the systemic risk of banks that affects the stability of the banking system. Hence, the question arises as to whether measurements of systemic risk in a common E.U. risk-based deposit insurance system are a formal necessity or if they are a value-adding process. Expanding the discussion of scientists, this article analyzes how contributions to insurance funds would change the banks of Lithuania following the introduction of the E.U.’s overall risk-based deposit insurance system and after taking into consideration the additional systemic risk. The research results that were obtained provide evidence that the introduction of a risk-based deposit insurance system would redistribute payments to the deposit insurance fund between banks operating in Lithuania, and, thereby, would contribute to a reduction in the negative effects of the deposit insurance system and would improve the stability in the financial system.

scholarly journals Implementing the countercyclical capital buffer in South Africa: Practical considerations

2015 ◽  
Vol 18 (1) ◽  
pp. 105-127 ◽  
Author(s):  
Pravin Burra ◽  
Pieter Juriaan De Jongh ◽  
Helgard Raubenheimer ◽  
Gary Van Vuuren ◽  
Henco Wiid
Keyword(s):  
South African ◽  
Systemic Risk ◽  
Financial Distress ◽  
Banking System ◽  
Capital Requirements ◽  
Critical Discussion ◽  
Basel Iii ◽  
Risk Indicator ◽  
Bank Capital ◽  
Minimum Capital

The Basel II regulatory framework significantly increased the resilience of the banking system, but proved ineffective in preventing the 2008/9 financial crisis. The subsequent introduction of Basel III aimed, inter alia, to supplement bank capital using buffers. The countercyclical buffer boosts existing minimum capital requirements when systemic risk surges are detected. Bolstering capital in favourable economic conditions cushions losses in unfavourable conditions, thereby addressing capital requirement procyclicality. This paper contains an overview of the countercyclical capital buffer and a critical discussion of its implementation as proposed in Basel III. Consequences of the buffer's introduction for South African banks are explored, and in particular, potential systemic risk indicator variables are identified that may be used by the South African Reserve Bank (SARB) as early warning indicators of imminent systemic financial distress. These indicators may be of value to the SARB, which could use them in taking decisions on the build-up and release of the countercyclical buffer for South African banks.

scholarly journals Measuring Systemic Risk on the Indonesia’s Banking System

2018 ◽  
Vol 2 (2) ◽  
pp. 94-105
Author(s):  
Alfan Mansur
Keyword(s):  
Systemic Risk ◽  
Financial Distress ◽  
Regime Switching ◽  
Banking System ◽  
Financial System ◽  
Principal Component ◽  
Switching Model ◽  
Causality Tests ◽  
Markov Regime Switching Model ◽  
Systemically Important Banks

Inter-connectedness is one important aspect in measuring the degree of systemic risk arising in the banking system. In this paper, this aspect besides the degree of commonality and volatility are measured using Principal Component Analysis (PCA), dynamic Granger causality tests and a Markov regime switching model. These measures can be used as leading indicators to detect pressures in the financial system, in particular the banking system. There is evidence that the inter-connectedness level together with degree of commonality and volatility among banks escalate substantially during the financial distress. It implies that less systemically important banks could become more important in the financial system during the abnormal times. Therefore, the list of systemically important banks as regulated in the Law on Prevention and Mitigation of Financial System Crisis (UU PPKSK) should be updated more frequently during the period of financial distress.

scholarly journals The Concentration of the Banking Industry and Its Exposure to Financial Contagion

2019 ◽  
Vol 11 (4) ◽  
pp. 95
Author(s):  
Mario Eboli
Keyword(s):  
Systemic Risk ◽  
Banking Industry ◽  
Balance Sheet ◽  
Banking System ◽  
Financial Contagion ◽  
Entire System ◽  
Ring Networks ◽  
Systemic Crisis ◽  
Systemic Crises

This paper focuses on the effects that the concentration of the banking industry has on its exposure to the risk of systemic crises due to direct, balance-sheet financial contagion. Studying three stylized (and analytically tractable) classes of interbank networks – namely the complete, star and ring networks – we show that the magnitude of the smallest insolvency shock that is capable of causing the default of all banks in the system depends on the degree of concentration of the industry. Concerning complete and ring interbank networks, we obtain that the more concentrated the banking system is, the smaller the magnitude of the shock that induces the insolvency of the entire system. That is, concentration renders the banking system more fragile. Conversely, we show that the opposite applies to star interbank networks – i.e. networks composed of a bank at the centre connected to a set of peripheral banks that are not connected among themselves. In this case, the more concentrated the industry, the larger the smallest shock that causes a systemic crisis, i.e. the smaller the exposure to systemic risk.

A Survey of Systemic Risk Indicators

2018 ◽  
Author(s):  
Antonio Di Cesare ◽  
Anna Rogantini Picco
Keyword(s):  
Systemic Risk ◽  
Risk Indicators

scholarly journals Evaluating risks-based communities of Mafia companies: a complex networks perspective

2021 ◽  
Author(s):  
Nicola Giuseppe Castellano ◽  
Roy Cerqueti ◽  
Bruno Maria Franceschetti
Keyword(s):  
Organized Crime ◽  
Financial Risk ◽  
Data Driven ◽  
Size Analysis ◽  
Risk Indicator ◽  
Financial Risks ◽  
Risk Profiles ◽  
Crime Organization ◽  
Similarities And Differences ◽  
Risk Ratios

AbstractThis paper presents a data-driven complex network approach, to show similarities and differences—in terms of financial risks—between the companies involved in organized crime businesses and those who are not. At this aim, we construct and explore two networks under the assumption that highly connected companies hold similar financial risk profiles of large entity. Companies risk profiles are captured by a statistically consistent overall risk indicator, which is obtained by suitably aggregating four financial risk ratios. The community structures of the networks are analyzed under a statistical perspective, by implementing a rank-size analysis and by investigating the features of their distributions through entropic comparisons. The theoretical model is empirically validated through a high quality dataset of Italian companies. Results highlights remarkable differences between the considered sets of companies, with a higher heterogeneity and a general higher risk profiles in companies traceable back to a crime organization environment.

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.

scholarly journals Removable denture is a risk indicator for peri-implantitis and facilitates expansion of specific periodontopathogens: a cross-sectional study

2021 ◽  
Vol 21 (1) ◽  
Author(s):  
Jasmin Grischke ◽  
Szymon P. Szafrański ◽  
Uthayakumar Muthukumarasamy ◽  
Susanne Haeussler ◽  
Meike Stiesch
Keyword(s):  
Bacterial Species ◽  
Positive Association ◽  
Cross Sectional Study ◽  
Risk Indicators ◽  
Risk Indicator ◽  
Sectional Study ◽  
Significant Positive Association ◽  
Cross Sectional ◽  
Linear Discriminant ◽  
Removable Denture

Abstract Background The prevalence of peri-implantitis ranges between 7 and 38.4% depending on risk indicators such as smoking, diabetes mellitus, lack of periodontal maintenance program, and history or presence of periodontitis. Currently, the possible effect of the type of superstructure on peri-implant health is unclear. This cross-sectional study aims to investigate the influence of the superstructure on the prevalence of peri-implant mucositis, peri-implantitis and peri-implant dysbiosis. Methods During a 32-month recruitment period dental implants were assessed to diagnose healthy peri-implant tissues, mucositis or peri-implantitis. The study included 1097 implants in 196 patients. Out of all peri-implantitis cases 20 randomly chosen submucosal biofilms from implants with fixed denture (FD) originating from 13 patients and 11 biofilms from implants with removable dentures (RD) originating from 3 patients were studied for microbiome analysis. Composition of transcriptionally active biofilms was revealed by RNAseq. Metatranscriptomic profiles were created for thirty-one peri-implant biofilms suffering from peri-implantitis and microbiome changes associated with superstructure types were identified. Results 16.41% of the implants were diagnosed with peri-implantitis, 25.00% of implants with RD and 12.68% of implants with FD, respectively. Multivariate analysis showed a significant positive association on patient (p =  < 0.001) and implant level (p = 0.03) between the prevalence of peri-implantitis and RD. Eight bacterial species were associated either with FD or RD by linear discriminant analysis effect size method. However, significant intergroup confounders (e.g. smoking) were present. Conclusions Within the limitations of the present work, RDs appear to be a risk indicator for peri-implantitis and seem to facilitate expansion of specific periodontopathogens. Potential ecological and pathological consequences of shift in microbiome from RDs towards higher activity of Fusobacterium nucleatum subspecies animalis and Prevotella intermedia require further investigation.

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