Measuring the systemic importance of interconnected banks

Mathias Drehmann and Nikola Tarashev ()

Journal of Financial Intermediation, 2013, vol. 22, issue 4, 586-607

Abstract: We propose a method for measuring the systemic importance of interconnected banks. In order to capture contributions to system-wide risk, our measure accounts fully for the extent to which a bank (i) propagates shocks across the system and (ii) is vulnerable to propagated shocks. An empirical implementation of this measure and a popular alternative reveals that interconnectedness is a key driver of systemic importance. However, since the two measures reflect the impact of interbank borrowing and lending on system-wide risk differently, they can disagree substantially about the systemic importance of individual banks.

Keywords: Systemic risk; Shapley value; Interbank network (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (114)

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Working Paper: Measuring the systemic importance of interconnected banks (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:22:y:2013:i:4:p:586-607

DOI: 10.1016/j.jfi.2013.08.001

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