Anginer, Deniz
Has the Global Banking System Become More Fragile over Time? Anginer, Deniz [electronic resource] / Anginer, Deniz - Washington, D.C., The World Bank, 2011 - 1 online resource (38 p.) - Policy research working papers. World Bank e-Library. .
This paper examines time-series and cross-country variations in default risk co-dependence in the global banking system. The authors construct a default risk measure for all publicly traded banks using the Merton contingent claim model, and examine the evolution of the correlation structure of default risk for more than 1,800 banks in more than 60 countries. They find that there has been a significant increase in default risk co-dependence over the three-year period leading to the financial crisis. They also find that countries that are more integrated, and that have liberalized financial systems and weak banking supervision, have higher co-dependence in their banking sector. The results support an increase in scope for intra-national supervisory co-operation, as well as capital charges for "too-connected-to-fail" institutions that can impose significant externalities.
10.1596/1813-9450-5849
Access to Finance
Banking crises
Banks & Banking Reform
Debt Markets
Default risk
Distance-to-default
Emerging Markets
Finance and Financial Sector Development
Financial Intermediation
Private Sector Development
Systemic risk
Too big to fail
Has the Global Banking System Become More Fragile over Time? Anginer, Deniz [electronic resource] / Anginer, Deniz - Washington, D.C., The World Bank, 2011 - 1 online resource (38 p.) - Policy research working papers. World Bank e-Library. .
This paper examines time-series and cross-country variations in default risk co-dependence in the global banking system. The authors construct a default risk measure for all publicly traded banks using the Merton contingent claim model, and examine the evolution of the correlation structure of default risk for more than 1,800 banks in more than 60 countries. They find that there has been a significant increase in default risk co-dependence over the three-year period leading to the financial crisis. They also find that countries that are more integrated, and that have liberalized financial systems and weak banking supervision, have higher co-dependence in their banking sector. The results support an increase in scope for intra-national supervisory co-operation, as well as capital charges for "too-connected-to-fail" institutions that can impose significant externalities.
10.1596/1813-9450-5849
Access to Finance
Banking crises
Banks & Banking Reform
Debt Markets
Default risk
Distance-to-default
Emerging Markets
Finance and Financial Sector Development
Financial Intermediation
Private Sector Development
Systemic risk
Too big to fail