The financial system can become more vulnerable to systemic banking crises as the potential for contagion across financial institutions increases. This contagion risk could arise because of shifts in the interlinkages between financial institutions, including the volume and complexity of contracts between them, and because of shifts in the economic risks to which they are commonly exposed. Analysis of the euro area banking system’s interlinkages, using the newly available large exposure data, suggests that the system could be more vulnerable to financial contagion through long-term interbank exposures than noted in other studies. That said, common exposures to the real economy – a standard contagion channel in the literature – represent a potential source of individual bank distress and non-systemic events. This analysis also provides an insight into the changes in contagion risk in the system over time, helping us to interpret changes in market indicators of systemic risk, such as aggregated credit default swap (CDS) prices.

(2019). Economic shocks and contagion in the euro area banking sector: a new micro-structural approach [journal article - articolo]. In FINANCIAL STABILITY REVIEW. Retrieved from http://hdl.handle.net/10446/164111

Economic shocks and contagion in the euro area banking sector: a new micro-structural approach

Torri, Gabriele;
2019-01-01

Abstract

The financial system can become more vulnerable to systemic banking crises as the potential for contagion across financial institutions increases. This contagion risk could arise because of shifts in the interlinkages between financial institutions, including the volume and complexity of contracts between them, and because of shifts in the economic risks to which they are commonly exposed. Analysis of the euro area banking system’s interlinkages, using the newly available large exposure data, suggests that the system could be more vulnerable to financial contagion through long-term interbank exposures than noted in other studies. That said, common exposures to the real economy – a standard contagion channel in the literature – represent a potential source of individual bank distress and non-systemic events. This analysis also provides an insight into the changes in contagion risk in the system over time, helping us to interpret changes in market indicators of systemic risk, such as aggregated credit default swap (CDS) prices.
articolo
2019
Montagna, Mattia; Torri, Gabriele; Covi, Giovanni
(2019). Economic shocks and contagion in the euro area banking sector: a new micro-structural approach [journal article - articolo]. In FINANCIAL STABILITY REVIEW. Retrieved from http://hdl.handle.net/10446/164111
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/164111
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