firms. We show that banks' exposures to impaired sovereign debt and the risk-shifting behavior of undercapitalized banks …

contingent liquidity risk from the provision of credit lines to NBFIs; and (iii) Empirical work confirms bank-NBFI linkages … through the correlation of their abnormal equity returns and market-based measures of systemic risk. We discuss some potential … regulatory responses, including treating the two sectors holistically; recognizing the implications for risk propagation and …