Network Valuation in Euro Area Syndicated and Interbank Loan Markets

Andre Santos

No 2026/061, IMF Working Papers from International Monetary Fund

Abstract: The objective of this paper is to assess the impact of single-name and widespread markdowns in syndicated leveraged loans on systemic risk in the euro area. Systemic risk implications of markdowns are simulated with network valuation models (as in Bardoscia et al. (2016)) and extended to accommodate recapitalization of systemically important banks. Key results indicate that, while the impact of single-name and widespread markdowns in syndicated leveraged loans on banks’ equity is not significant under a strong confidence in the banking system, their impact could be devastating if confidence is low. This could be mitigated by timely and calibrated recapitalization of systemically important banks.

Keywords: Contagion; syndicated loans; euro area banks; liability networks; recapitalization.; equity loss; lending bank; bank default; survival probability; leveraged loan markdown; balance sheet identity; important bank; bank distress; equity valuation; Loans; Systemic risk; Corporate sector; Bank credit; Interbank markets; Europe (search for similar items in EconPapers)
Pages: 36
Date: 2026-03-27
New Economics Papers: this item is included in nep-eec and nep-net
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=575064 (application/pdf)

Related works:
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:imf:imfwpa:2026/061

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().