IMF Working Papers

Interconnectedness of Global Systemically-Important Banks and Insurers

By Sheheryar Malik, TengTeng Xu

September 29, 2017

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Sheheryar Malik, and TengTeng Xu. Interconnectedness of Global Systemically-Important Banks and Insurers, (USA: International Monetary Fund, 2017) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—i.e., among all GSIBs and GSIIs—tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.

Subject: Banking, Financial crises, Financial institutions, Global systemically important banks, Global systemically important insurers, Insurance companies, Stocks

Keywords: Asia and Pacific, Balance sheet, Bank characteristic, Bank subsidiary, BNP Paribas, Book value, Connectedness, Connectedness in the system, Dynamic return connectedness, Economic policy, Equity prices, Equity return, Europe, Global, Global systemically important banks, Global systemically important banks and insurers, Global systemically important insurers, GSIBs from the United States, Insurance companies, Profitable GSIBs, Return connectedness, Return connectedness of United States, Stocks, System of GSIBs, Vector autoregression, Volatility, WP

Publication Details

  • Pages:

    57

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2017/210

  • Stock No:

    WPIEA2017210

  • ISBN:

    9781484320716

  • ISSN:

    1018-5941