Short-Term Wholesale Funding and Systemic Risk: A Global Covar Approach
IMF Working Papers, February 1, 2012
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Bibliographic details
- Published: February 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463936471.001
Overview
- Paper identifies main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach.
- Finds short-term wholesale funding is a key determinant in triggering systemic risk episodes.
- Finds no evidence that a larger size increases systemic risk within the class of large global banks.
- Shows that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns.
Key findings
- Short-term wholesale funding emerges as the most relevant systemic factor.
- No evidence that larger size increases systemic risk within the class of large global banks.
- Sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns.
Policy implications and recommendations
- Results support the Basel Committee's proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
Methodology and scope
- Approach: novel CoVaR approach applied to a set of international large-scale complex banks.
- Themes and methods referenced: Econometric analysis, Vector autoregression, systemic risk assessment.
Subjects and keywords (as listed)
- Subject: Banking, Commercial banks, Econometric analysis, Financial crises, Financial institutions, Financial sector policy and analysis, Financial statements, Public financial management (PFM), Systemic risk, Vector autoregression
- Keywords: Africa, BAA corporate bond yield, balance sheet, balance-sheet data, bank characteristic, bank Dummiesj, bank overdraft, bank recapitalization date, Commercial banks, composite index, Europe, Financial statements, financial system, Global, Liquidity Risk, Macroprudential Regulation, ranking bank, Systemic Risk, Vector autoregression, Wholesale Funding, WP, yield spread