Author/s: AH Sato, P Tasca
Published in: arXiv preprint arXiv:1504.07152
Publication date: 2015/4/27
Download: [PDF] from arxiv.org
Systemic risk in banking systems is a crucial issue that remains to be completely addressed. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the system and credit risk from their lending in the interbank market. By and large, both risks increase during severe financial turmoil. Under this scenario, the paper shows how both the individual and the systemic default tend to coincide.
Picture: Averaged bank capital adequacy ratio in 8 countries from 2000 to 2013.