Related papers: Anatomy of a Bail-In
Since beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist EU member states in taxpayer-funded bail-outs. These crisis resolutions are often accompanied by austerity programs causing…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
This paper examines the degree of integration at euro area financial markets. To that end, we estimate overall and country-specific integration indices based on a panel vector-autoregression with factor stochastic volatility. Our results…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
We analyse the importance of international relations between countries on the financial stability. The contagion effect in the network is tested by implementing an epidemiological model, comprising a number of European countries and using…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
This paper empirically analyzes a dataset published by the European Banking Authority. Our main aim was to study how the Leverage Ratio is affected by adverse financial scenarios. This was be followed by observing how Leverage Ratio…
Various works have already showed that common shocks and cross-country financial linkages caused the banking systems of several countries to be highly interconnected with the result that during bad times, banking crises may arise…
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
This paper studies systemic-risk connectedness in the European insurance sector at three levels of granularity: across major segments of financial markets, across insurance subsectors, and across individual insurance companies. Using a…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
Why do banks fail? We create a panel covering most commercial banks from 1863 through 2024 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an…
Several proposals for the reform of the euro area advocate the creation of a market in synthetic securities backed by portfolios of sovereign bonds. Most debated are the so-called European Safe Bonds or ESBies proposed by Brunnermeier,…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
This study estimates the risk contributions of individual European countries regarding the indemnity payments in agricultural insurance. We model the total risk exposure as an insurance portfolio where each country is unique in terms of its…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
We consider networks of banks with assets and liabilities. Some banks may be insolvent, and a central bank can decide which insolvent banks, if any, to bail out. We view bailouts as an optimization problem where the central bank has given…