We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign debtors. We apply our measure to examine the fragility of the European...

Shadow banking, as one of the main sources of financial stability concerns, is the subject of much international debate. In broad terms, shadow banking refers to activities related to credit intermediation and liquidity and maturity transformation that take place outside the regulated banking...

This paper uses high frequency market value data on credit default swap spreads and intra-day stock prices to measure systemic risk in the insurance sector. Using the systemic risk measure, we examine the inter-connectedness between banks and insurers with Granger causality tests. Based on...

Since the summer of 2007, the financial system has faced two major systemic crises. European banks have been at the center of both crises, particularly of the European sovereign debt crisis. This article analyzes systemic risk of European banks across both crises exploiting the specific...

Shadow banking, as one of the main sources of financial stability concerns, is the subject of much international debate. In broad terms, shadow banking refers to activities related to credit intermediation and liquidity and maturity transformation that take place outside the regulated banking...

We show that lender of the last resort (LOLR) policy contributes to higher bank interconnectedness and systemic risk. Using novel micro-level data, we analyze the haircut gap channel of LOLR – the difference between the private market and central bank haircuts. LOLR increases...

We estimate a multivariate early-warning model to assess the usefulness of private credit and other macro-financial variables in predicting banking sector vulnerabilities. Using data for 23 European countries, we find that global variables and in particular global credit growth are strong...

We quantify the gains from regulating maturity transformation in a model of banks which finance long-term assets with non-tradable debt. Banks choose the amount and maturity of their debt trading off investors’ preference for short maturities with the risk of systemic crises. Pecuniary...

How do crises affect Central clearing Counterparties (CCPs)? We focus on CCPs that clear and guarantee a large and safe segment of the repo market during the Eurozone sovereign debt crisis. We start by developing a simple framework to infer CCP stress, which can be measured through the...

In the aftermath of the 2008 financial crisis, the development of shadow banking has been seen as one of the determinants for the increase of system risk. While diversity within the shadow banking system has been largely overlooked, in this paper we focus on European Monetary Market Funds (MMFs)...