73 research outputs found
Interbank Contagion in the Dutch Banking Sector
We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including the answers of banks to a questionnaire, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the other banks, but will not lead to a complete collapse of the interbank market. The contagion effects of the failure of a smaller bank are limited. The exposures to foreign counterparties are large and warrant further research. An important contribution of this paper is that we show, using survey data, that the entropy estimation using large exposures data as applied in many previous papers gives an adequate approximation of the actual linkages between banks. Hence, this methodology does not seem to introduce a bias.interbank market; contagion; simulation
Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis
We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including survey data, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the other banks but will not lead to a complete collapse of the interbank market. The exposures to foreign counterparties are large and warrant further research. An important contribution of this paper is that we show, using survey data, that the entropy estimation using large exposures data as applied in many previous papers gives an adequate approximation of the actual linkages between banks. Hence, this methodology does not seem to introduce a bias.
Risk in Financial Conglomerates: Management and Supervision
Financial conglomerates, combining banking, securities trading, and insurance, have become an important part of the financial landscape in many countries. Cross-sector consolidation has been fostered by trends such as disintermediation, globalization, and deregulation creating new challenges for both the group’s management as well as for regulators. We discuss the theoretical reasons why supervisors are interested in the riskiness of a financial firm and why – for firms – a similar concern emerges from the theory on risk management, both from a market and a firm perspective. After describing the Dutch institutional set-up, we turn to the discussion of the following question: How can a supervisor devise a framework of supervision that does justice to a financial conglomerate’s own responsibility and, at the same time, safeguards the general public’s interest? The framework, we feel, should be similar in flavor to the Supervisory Review, as proposed in the new Basel accord.supervision, financial conglomerates, banks, insurers, diversification
Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe
We analyse foreign bank penetration in Central and Eastern Europe (CEE)and its influence on private sector credit,taking into account both cross-border credit and credit by foreign bank subsidiaries. By combining BIS and BankScope data into a unique database we make a clear distinction between these credit categories.We show that the relative importance of foreign bank subsidiaries has increased considerably during recent years.However,in Hungary and Poland foreign banks were also important during the first transition years,as they provided substantial amounts of cross-border credit.We do not find evidence of foreign banks deserting CEE during financial crises or economic downturns.Although cross-border credit did decrease during some periods,foreign banks expanded the credit supply of their subsidiaries simultaneously.This may be an important consideration for (transition)countries that still have to decide whether to open up their markets to foreign bank subsidiaries.foreign banks,cross-border credit,transition economies
Early-warning signals of topological collapse in interbank networks
The financial crisis clearly illustrated the importance of characterizing the
level of 'systemic' risk associated with an entire credit network, rather than
with single institutions. However, the interplay between financial distress and
topological changes is still poorly understood. Here we analyze the quarterly
interbank exposures among Dutch banks over the period 1998-2008, ending with
the crisis. After controlling for the link density, many topological properties
display an abrupt change in 2008, providing a clear - but unpredictable -
signature of the crisis. By contrast, if the heterogeneity of banks'
connectivity is controlled for, the same properties show a gradual transition
to the crisis, starting in 2005 and preceded by an even earlier period during
which anomalous debt loops could have led to the underestimation of
counter-party risk. These early-warning signals are undetectable if the network
is reconstructed from partial bank-specific data, as routinely done. We discuss
important implications for bank regulatory policies.Comment: 28 pages, 23 figures, 1 tabl
Stress Testing Linkages between Banks in the Netherlands
Assessing the stability of the financial sector is becoming more common in many countries. This paper presents two useful approaches, applied to the Netherlands. First we discuss the results of a contagion analysis of the Dutch interbank market. We use various ways to measure linkages between banks and find that the interbank market is fairly robust. We then turn to a network analysis of payment flows between Dutch banks. This analysis provides us with a better understanding of the network structure in this type of market. We specifically look at the effect of the recent turmoil on the payment network and find no significant changes.interbank, payment, systemic risk, financial stability, network, topology
Buitenlandse banken in Midden- en Oost-Europa. Aanwinst of risicofactor?
Sinds het begin van het transitieproces in Midden- en Oost-Europa is het belang van buitenlandse banken in de financiering van het lokale bedrijfsleven sterk toegenomen. Uit onze analyse, gebaseerd op een combinatie van BIS- en BankScopecijfers voor 11 transitielanden blijkt dat dochters van buitenlandse banken tot op heden een stabiele kredietbron zijn geweest, zelfs in periodes waarin binnenlandse banken hun kredietverlening verminderden. Gedurende economisch zware tijden voor het binnenlandse bankwezen, zoals na de crisis in Rusland, breidden buitenlandse banken hun activiteiten in de regio juist uit. Deels gebeurde dit door verzwakte lokale banken op te kopen, maar daarnaast was sprake van autonome groei van de reeds bestaande dochterbanken in de regio. Grensoverschrijdende kredietverlening is echter minder stabiel gebleken.foreign banks transition economies credit stability
A dynamic network model of the unsecured interbank lending market
We introduce a dynamic network model of interbank lending and estimate the parameters by indirect inference using network statistics of the Dutch interbank market from February 2008 to April 2011. We find that credit-risk uncertainty and peer monitoring are significant factors in explaining the sparse core-periphery structure of the market and the presence of relationship lending. Shocks to credit-risk uncertainty lead to extended periods of low market activity, intensified by reduced peer monitoring. Moreover, changes in the central bank's interest rate corridor have both a direct effect on the market as well as an indirect effect by changing banks’ monitoring efforts
Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis
We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including survey data, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the other banks but will not lead to a complete collapse of the interbank market. The exposures to foreign counterparties are large and warrant further research. An important contribution of this paper is that we show, using survey data, that the entropy estimation using large exposures data as applied in many previous papers gives an adequate approximation of the actual linkages between banks. Hence, this methodology does not seem to introduce a bias
Interbank Contagion in the Dutch Banking Sector
We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including the answers of banks to a questionnaire, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the other banks, but will not lead to a complete collapse of the interbank market. The contagion effects of the failure of a smaller bank are limited. The exposures to foreign counterparties are large and warrant further research. An important contribution of this paper is that we show, using survey data, that the entropy estimation using large exposures data as applied in many previous papers gives an adequate approximation of the actual linkages between banks. Hence, this methodology does not seem to introduce a bias
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