Addressing Interconnectedness: Concepts and Prudential Tools

By Nicolas Arregui, Mohamed Norat, Antonio Pancorbo, Jodi G. Scarlata, Eija Holttinen, Fabiana Melo, Jay Surti, Christopher Wilson, Rodolfo Wehrhahn, Mamoru Yanase

September 26, 2013

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Nicolas Arregui, Mohamed Norat, Antonio Pancorbo, Jodi G. Scarlata, Eija Holttinen, Fabiana Melo, Jay Surti, Christopher Wilson, Rodolfo Wehrhahn, and Mamoru Yanase. Addressing Interconnectedness: Concepts and Prudential Tools, (USA: International Monetary Fund, 2013) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews tools used to identify and measure interconnectedness and raises the awareness of policymakers as to potential cross-sectional implications of prudential tools aimed at controlling interconnectedness. The paper examines two sets of tools—developed at the IMF and externally—to identify the implications of interconnectedness in systemic risk and how these tools have been applied in IMF surveillance. The paper then proposes a preliminary framework to analyze some key internationally-agreed-upon and national prudential tools and finds that while many prudential tools are effective in reducing interconnectedness, the interaction among these tools is far less clear cut.

Subject: Bank resolution framework, Banking, Countercyclical capital buffers, Financial contagion, Financial crises, Financial regulation and supervision, Financial sector policy and analysis, Liquidity requirements, Systemic risk

Keywords: Balance sheet exposure, Bank portfolio, Bank resolution framework, Banking system, Capital surcharge, Clearing member, Countercyclical capital buffers, Counterparty exposure, Credit risk, Exposure limit, FI restructuring, FI size, Financial contagion, Funding cost, Global, Interconnectedness, Investment banking, Liquidity regulation, Liquidity requirements, Network analysis, Policymakers, Prudential tools, Resolution framework, Resolution process, Systemic risk, WP

Publication Details

Pages:

58
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/199
Stock No:

WPIEA2013199
ISBN:

9781475531855
ISSN:

1018-5941

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