Bank Heterogeneity and Crisis Migration: A General Equilibrium Analysis of Systemic Risk

Marcella Lucchetta ()
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Marcella Lucchetta: Ca' Foscari University of Venice

No 2025: 05, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: In the wake of the 2023 Silicon Valley Bank collapse and the 2025 tariff shocks, systemic risk poses a serious threat to global financial stability. We propose a three-period general equilibrium (GE) model that accounts for bank heterogeneity and crisis-driven migration. Our model distinguishes between retail banks, with a marginal expected shortfall of -0.019, and investment banks at -0.045, successfully reducing systemic risk and lowering the overall expected shortfall from -0.032 to -0.029. Unlike complex DSGE frameworks, our model offers clear insights into the vulnerabilities of Silicon Valley Bank and the impact of tariffs. We recommend Basel III-aligned policies, including capital relief and targeted stress tests, and propose real-time crisis prediction tools. This model serves as a vital resource for policymakers and investors, helping them navigate systemic crises and address the challenges posed by "too big to fail" institutions.

Keywords: Bank Heterogeneity; Systemic Risk; Crisis Migration; General Equilibrium; Marginal Expected Shortfall (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 G28 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025
New Economics Papers: this item is included in nep-fdg
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