Are Nonbank Financial Institutions Systemic?

Andres Fernandez (), Martin Hiti and Asani Sarkar

No 20241001, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Recent events have heightened awareness of systemic risk stemming from nonbank financial sectors. For example, during the COVID-19 pandemic, liquidity demand from nonbank financial entities caused a “dash for cash” in financial markets that required government support. In this post, we provide a quantitative assessment of systemic risk in the nonbank sectors. Even though these sectors have heterogeneous business models, ranging from insurance to trading and asset management, we find that their systemic risk has common variation, and this commonality has increased over time. Moreover, nonbank sectors tend to become more systemic when banking sector systemic risk increases.

Keywords: nonbank financial institutions (NBFIs); nonbanks; banks; systemic risk; Interconnections (search for similar items in EconPapers)
JEL-codes: G01 G21 G22 G23 G24 (search for similar items in EconPapers)
Date: 2024-10-01
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac, nep-mon and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:98893

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