This paper reviews the approaches to systemic risk analysis in 32 central bank financial stability reports (FSRs). We compare and contrast the systemic risk analysis in FSRs with the IMF Article IV staff reports, noting that Article IV staff reports and FSRs frequently pick up analytical content...

The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country's financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country's...

We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools....

This paper examines empirically the role of macroprudential policy in addressing the effects of external shocks on financial stability. In a sample of 62 economies over the period of 2000: Q1-2016: Q4, our dynamic panel regressions show that an appreciation of the local exchange rate is...

This paper presents a novel approach to investigate and model the network of euro area banks' large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral...

After a steady increase following the global financial crisis, private nonfinancial sector leverage rose further during the COVID-19 on the back of easy financial conditions induced by unprecedented policy support. We investigate the empirical relationships between increased leverage, financial...

There is growing recognition that prolonged monetary policy easing of major economies can have extraterritorial spillovers, driving up financial system leverage in other countries. When faced with such a rise of threats to financial stability, what can countries do? Specifically, is there a role...

We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the...

This paper explains the treatment of sovereign risk in macroprudential solvency stress testing, based on the experiences in the Financial Sector Assessment Program (FSAP). We discuss four essential steps in assessing the system-wide impact of sovereign risk: scope, loss estimation, shock...