Systemic risk contributions: A credit portfolio approach |
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Authors: | Natalia Puzanova Klaus Düllmann |
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Institution: | 1. Deutsche Bundesbank, Financial Stability Departement, Wilhelm-Epstein-Str. 14, 60431 Frankfurt/Main, Germany;2. Deutsche Bundesbank, Department of Banking and Financial Supervision, Wilhelm-Epstein-Str. 14, 60431 Frankfurt/Main, Germany |
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Abstract: | We put forward a framework for measuring systemic risk and attributing it to individual banks. Systemic risk is coherently measured as the expected loss to depositors and investors when a systemic event occurs. The risk contributions are calculated so as to ensure a full risk allocation among institutions. Applying our methodology to a panel of 54–86 of the world’s major commercial banks for a 13-year time span with monthly frequency not only allows us to closely match the list of G-SIBs; we can also use individual risk contributions to compute bank-specific surcharges: systemic capital charges as well as countercyclical buffers. We therefore address both dimensions of systemic risk – cross-sectional and time-series – in a single integrated approach. As the analysis of risk drivers confirms, the main focus of macroprudential supervision should be on a solid capital base throughout the financial cycle and de-correlation of banks’ asset values. |
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Keywords: | G21 G28 C15 C63 |
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