Non-Bank Financial Institutions and Banks’ Fire-Sale Vulnerabilities

Nicola Cetorelli, Mattia Landoni and Lina Lu
Additional contact information
Lina Lu: https://www.bostonfed.org/people/bank/lina-lu.aspx

No SRA 23-01, Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston

Abstract: Banks carry significant exposures to nonbanks from direct dealings, but they can also be exposed, indirectly, through losses in asset values resulting from fire-sale events. We assess the vulnerability of U.S. banks to fire sales potentially originating from any of twelve separate non-bank segments and identify network-like externalities driven by the interconnectedness across non-bank types in terms of asset holdings. We document that such network externalities can contribute to very large multiples of an original fire sale, thus suggesting that conventional assessments of fire-sale vulnerabilities can be grossly understated and highlighting the value of treating non-bank financial institutions as one organic whole for monitoring purposes.

Keywords: fire sales; network externalities; financial stability; nonbanks; monitoring (search for similar items in EconPapers)
JEL-codes: G21 G23 (search for similar items in EconPapers)
Pages: 39
Date: 2023-03-03
New Economics Papers: this item is included in nep-net
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bostonfed.org/publications/risk-and-po ... vulnerabilities.aspx Summary (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2023/sra2301.pdf Full text (application/pdf)

Related works:
Working Paper: Non-Bank Financial Institutions and Banks’ Fire-Sale Vulnerabilities (2023)
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: https://EconPapers.repec.org/RePEc:fip:fedbqu:97033

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().