Economics at your fingertips  

Evaluating Systemic Risk using Bank Default Probabilities in Financial Networks

Sergio Souza, Thiago Silva (), Benjamin Tabak and Solange Guerra

No 426, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: In this paper, we propose a novel methodology to measure systemic risk in networks composed of financial institutions. Our procedure combines the impact effects obtained from stress measures that rely on feedback centrality properties with default probabilities of institutions. We also present new heuristics for designing feasible and relevant stress-testing scenarios that can subside regulators in financial system surveillance tasks. We develop a methodology to extract banking communities and show that these communities are mostly composed of non-large banks and have a relevant effect on systemic risk. This finding renders these communities objects of interest for supervisory activities besides SIFIs and large banks. Finally, our results provide insights and guidelines that can be useful for policymaking.

Date: 2016-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-net, nep-pke and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Evaluating systemic risk using bank default probabilities in financial networks (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().

Page updated 2024-05-07
Handle: RePEc:bcb:wpaper:426