On bank credit risk: systemic or bank-specific? Evidence from the US and UK

Junye Li () and Gabriele Zinna

No 951, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We develop a multivariate credit risk model that accounts for joint defaults of banks and al-lows us to disentangle how much of banks' credit risk is systemic. We find that the US and UK dif-fer not only in the evolution of systemic risk, but in particular in their banks' systemic exposures. In both countries, however, systemic credit risk varies substantially, represents about half of total bank credit risk on average, and induces high risk premia. Further, the results suggest that sovereign and bank systemic risk are particularly interlinked in the UK.

Keywords: systemic bank credit Risk; credit default swaps; distress risk premia; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: F34 G12 G15 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_951_14

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