Systemic risk
Basel III has aided system stability, interbank models suggest
Model predicts future crashes will not be total wipeout
BoE paper maps contagion via CDS market
Economists identify mechanism whereby declining creditworthiness can spill from one bank to another via credit default swaps
BIS paper flags importance of “multi-layered” bank networks
Authors go beyond aggregate exposures to reveal “multiplex” interbank networks, which could allow more tailored policymaking
FSB updates systemic institutions list
Citigroup and HSBC swap places at the top of the rankings; ECB's “significant” banks list now at 127
IMF's systemic risk findings called into question
Financial connectedness measure “not usually sharply aligned with systemic risk”, says Darrell Duffie
Government approves final stage of Thai development plan
Bank of Thailand will promote electronic payments in latest phase of financial sector master plan; all phases to be completed by 2020
Austria should ‘stand ready’ to tighten capital requirements, IMF staff say
The country has made ‘significant progress’ in restructuring the regulatory and supervisory framework, the report says, but the banking sector's resilience could be strengthened
Danish economists test measure of systemic risk
National Bank of Denmark paper uses ‘SRISK’ measure to assess systemic risk in the Danish financial sector, finding it was a good predictor of banks that needed bailing out
Market discipline ‘key pillar’ of RBNZ toolkit, article says
Article in latest Reserve Bank of New Zealand bulletin insists new requirements have not come at the expense of market discipline – they are both ‘key pillars’ of regulatory toolkit
BoE reveals final element of ring-fencing framework
Systemic risk buffer will apply to ring-fenced assets, with the aim of preventing banks amplifying stress; BoE also hopes it will give smaller banks a competitive boost
Monetary policy easing increases systemic risk-taking, paper finds
Brazilian domestic monetary policy is more statistically significant in this regard than foreign monetary policy, working paper suggests
Tucker to succeed Bair as Systemic Risk Council chair
Ex-Bank of England deputy governor Paul Tucker to chair private sector group pushing for ‘strong and simple reforms’ to financial system; succeeds former FDIC chair Sheila Bair
Dutch paper compares measures of systemic risk with market perceptions
Working paper notes the need for ‘careful consideration’ of the impact of prudential policies on both bank risk and systemic risk
US rules on foreign banks criticised by SRB’s König
Elke König, head of the eurozone's bank resolution authority, says US requirements for foreign banks to have a local holding company run counter to the single point-of-entry approach to resolution
The challenges for central banks
Demands are being made for central banks to consider financial stability alongside price stability, as a key component of their monetary policy. But that is nothing new for central banks
(Too) great expectations for macro-prudential?
Macro-prudential policies are a welcome response to the financial crisis, but not necessarily in their current incarnation. BIS economics head Claudio Borio highlights their limitations
Cross-border vulnerabilities should be taken more seriously, IMF paper says
Working paper says funding vulnerabilities ‘have real effects', although they have declined since the crisis due to lower exposures and increased capital levels
Fed consults over financial stability implications of commodities investment
Financial firms' involvement in commodity markets could pose a risk to financial stability, particularly in the event of a natural or environmental disaster
Canadian paper calls for ‘simple and digestible’ communication on financial stability issues
The paper says central banks should use plain language and build a coherent narrative when communicating financial stability concerns or policies
OECD’s William White fears global economic system is still highly unstable
William White tells Christopher Jeffery he is wary of placing too much reliance on the ‘science’ of monetary or regulatory policy. He also believes the world economic system is still out of balance
Moody's says big US banks no longer ‘too big to fail'
Agency cuts ratings of four systemically important US banks, including Goldman Sachs and JP Morgan, as Dodd-Frank believed to reduce prospects of future government bailouts
Lautenschläger enunciates Buba's macro-pru approach
Focus on individual banks must be complemented by efforts to stem 'pro-cyclical' tendencies of the financial system as a whole, says Bundesbank deputy
Norges Bank governor heralds countercyclical capital buffer
Øystein Olsen says 'primary purpose' of prudential tool is increasing banks' resilience as systemic risk increases; buffer will vary between zero and 2.5% of risk-weighted assets
IMF working paper examines tools to measure interconnectedness
Network analysis and price-based measures are both used to measure interconnectedness in systemic risk; paper finds many tools can reduce systemic risk, but interaction is not clear cut