area banks with that of the euro area economies. It reflects banks' heterogeneity by replicating the structure of their … balance sheets and profit and loss accounts. In the model, banks adjust their assets, interest rates, and profit distribution …

In the presence of adverse macroeconomic shocks, simultaneous capital losses in multiple banks can prompt them to … that banks impose on each other and on economic activity. The model can thus be used to assess the contributions of … individual banks to systemic risk along the time dimension …

largest euro area credit institutions across 19 countries. The approach involves modelling banks'reactions to changing … acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. Our … results highlight the importance of the starting level of bank capital, bank asset quality, and banks' adjustments for the …