We study the interplay between two channels of interconnectedness in the banking system. The first one is a direct interconnectedness, via a network of interbank loans, banks' loans to other corporate and retail clients, and securities holdings. The second channel is an indirect...

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 review heterogeneous agent-based models of financial stability and their application in stress tests. In contrast to the mainstream approach, which relies heavily on the rational expectations assumption and focuses on situations where it is possible to compute an equilibrium, this approach...

Foreign-dominated banking sectors, such as those prevalent in Central and Eastern Europe, are susceptible to two major sources of systemic risk: (i) linkages between local banks, and (ii) linkages between a foreign par- ent bank and its local subsidiary. Using a nonparametric method based on...

This paper examines the link between bank competition measures and risk indicators using quarterly interbank exposures data for all banks in Mexico during 2008Q1-2019Q1. The classical literature focuses on disentangling the link between competition and individual bank solvency risk. In this...