Banking System Vulnerability: 2023 Update

Matteo Crosignani, Thomas Eisenbach and Fulvia Fringuellotti

No 20231106, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The bank failures that occurred in March 2023 highlighted how unrealized losses on securities can make banks vulnerable to a sudden loss of funding. This risk, which materialized following the rapid rise in interest rates that began in early 2022, underscores the importance of monitoring the vulnerabilities of the banking system. In this post, as in previous years, we provide an update of four analytical models aimed at capturing different aspects of vulnerability of the U.S. banking system, with data through the second quarter of 2023. In addition, we discuss changes made to the methodology based on the lessons from March 2023 and assess how the system-level vulnerability has evolved.

Keywords: banks; capital; fire sales; liquiditiy; runs (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2023-11-06
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-rmg
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