Estimating systemic risk for non-listed euro-area banks

Robert Engle, Tina Emambakhsh, Simone Manganelli, Laura Parisi and Riccardo Pizzeghello

No 2856, Working Paper Series from European Central Bank

Abstract: The systemic risk measure (SRISK) by V-Lab provides a market view of the vulnerability of financial institutions to a sudden downturn in the economy. To overcome the shortcoming that it cannot be applied to non-listed banks, SRISK characteristics of listed banks are mapped on balance sheet information. Systemic risk tends to be higher for banks that are larger, less profitable and have lower equity funding. Balance sheet information provides a surprisingly good approximation of SRISK for non-listed banks, when compared with banks’ capital depletion from the EU-wide stress testing exercises in 2018 and 2021. The proposed methodology can usefully complement the more thorough overview provided by traditional stress tests, providing supervisors the option to evaluate the systemic risks of the banking system at a higher frequency and at a fraction of the costs. JEL Classification: G21, G28, G1

Keywords: banks’ balance sheet information content; stress testing; systemic risk (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-rmg
Note: 196912
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Related works:
Journal Article: Estimating systemic risk for non-listed Euro-area banks (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232856

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