Shock amplification in an interconnected financial system of banks and investment funds

IF 6.1 2区经济学 Q1 BUSINESS, FINANCE

Journal of Financial Stability Pub Date : 2024-02-03 DOI:10.1016/j.jfs.2024.101234

Matthias Sydow , Aurore Schilte , Giovanni Covi , Marija Deipenbrock , Leonardo Del Vecchio , Pawel Fiedor , Gábor Fukker , Max Gehrend , Régis Gourdel , Alberto Grassi , Björn Hilberg , Michiel Kaijser , Georgios Kaoudis , Luca Mingarelli , Mattia Montagna , Thibaut Piquard , Dilyara Salakhova , Natalia Tente

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Abstract

This paper shows how the combined endogenous reaction of banks and investment funds to an exogenous shock can amplify or dampen losses to the financial system compared to results from single-sector stress testing models. We build a new model of contagion propagation using a very large and granular data set for the euro area. Based on the economic shock caused by the Covid-19 outbreak, we model three sources of exogenous shocks: a default shock, a market shock and a redemption shock. Our contagion mechanism operates through a dual channel of liquidity and solvency risk. Our analysis reveals that adding the fund sector to our model for banks leads to additional losses through fire sales and a further depletion of banks’ capital ratios by around one percentage point. The main driver of additional bank losses are endogenous market losses generated by investment funds’ asset liquidation.

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银行和投资基金相互关联的金融体系中的冲击放大效应

与单一部门压力测试模型的结果相比，本文展示了银行和投资基金对外部冲击的综合内生反应如何扩大或抑制金融体系的损失。我们利用欧元区庞大而精细的数据集建立了一个新的传染传播模型。基于 Covid-19 爆发造成的经济冲击，我们建立了三个外生冲击源模型：违约冲击、市场冲击和赎回冲击。我们的传染机制通过流动性和偿付能力风险的双重渠道运作。我们的分析表明，在我们的银行模型中加入基金部门会导致因火灾销售造成的额外损失，并使银行的资本比率进一步下降约一个百分点。造成银行额外损失的主要原因是投资基金资产清算产生的内生性市场损失。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Financial Stability Multiple-

CiteScore

7.70

自引率

9.30%

发文量

审稿时长

34 days

期刊介绍： The Journal of Financial Stability provides an international forum for rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises, including banking, securities market, payments and currency crises. The primary focus is on applied research that would be useful in affecting public policy with respect to financial stability. Thus, the Journal seeks to promote interaction among researchers, policy-makers and practitioners to identify potential risks to financial stability and develop means for preventing, mitigating or managing these risks both within and across countries.