Individual bank diversification can increase systemic risk, researchers find

stopping systemic risk

As individual banks diversify their exposures, systemic risk may increase through reduced diversity among banks, a staff paper from the Monetary Authority of Singapore finds.

“Although regional banks are individually non-systemic, they have the potential to behave ‘systemic as a herd’,” the authors say.

In the paper, Naohisa Hirakata, Yosuke Kido and Jie Liang Thum examine a sample of Japanese regional banks’ exposure to market risk factors. They analyse how these affect systemic risk through

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