Cross-Border Financial Surveillance: A Network Perspective
IMF Working Papers, April 1, 2010
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Bibliographic details
- Authors: Juan Sole, Marco A Espinosa-Vega
- Published: April 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455200641.001
Summary and key findings
- Effective cross-border financial surveillance requires the monitoring of direct and indirect systemic linkages.
- Network analysis can make a significant contribution by simulating different credit and funding shocks to the banking systems of selected countries.
- Inclusion of risk transfers can modify the risk profile of entire financial systems.
- Limitations of the simulations reflect existing information and data gaps; these shortcomings are a call to improve the collection and analysis of data on cross-border financial exposures.
Simulation approach and methodological notes
- Simulations focus on different credit and funding shocks to banking systems of a number of selected countries.
- An enriched simulation algorithm able to account for risk transfers is proposed.
Risk transfers and system-wide effects
- Demonstrated that inclusion of risk transfers could modify the risk profile of entire financial systems.
- Proposal: enrich simulation algorithms to explicitly incorporate risk transfers when assessing systemic linkages.
Data gaps and surveillance implications
- Some limitations of the simulations are attributed to existing information and data gaps.
- Policy implication: improve collection and analysis of data on cross-border financial exposures to strengthen surveillance.