Has the Global Banking System Become More Fragile over Time?

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 international supervisory co-operation, as well as capital charges for "too-connected-to-fail" institutions that can impose significant externalities.

Bibliographic Details

Main Authors:	Anginer, Deniz, Demirgüç-Kunt, Asli
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2011-10-01
Subjects:	ACCOUNTING, ASSET LIQUIDITY, ASSET PRICES, ASSET VALUE, ASSET VALUES, ASSETS RATIO, BACKED SECURITIES, BALANCE SHEET, BANK ASSETS, BANK CAPITAL, BANK DEPOSIT, BANK DEPOSITS, BANK OF ENGLAND, BANK POLICY, BANK SUPERVISION, BANKING CRISES, BANKING CRISIS, BANKING REGULATION, BANKING SECTOR, BANKING SECTORS, BANKING SUPERVISION, BANKING SYSTEM, BANKRUPTCY, BANKS, BARRIER, BORROWING COSTS, CALL OPTION, CAPITAL ASSETS, CAPITAL CONTROL, CAPITAL FLOWS, CAPITAL RATIO, CAPITAL REQUIREMENTS, CAPITALIZATION, CDS, CENTRAL BANK, COMMERCIAL BANKS, COMMUNICATIONS TECHNOLOGY, CONNECTIVITY, CONSOLIDATION, CORPORATE DEBT, COUNTRY DUMMY, COUNTRY FIXED EFFECTS, CREDIT RISK, DEBT, DEFAULT PROBABILITIES, DEFAULT PROBABILITY, DEFAULT RISK, DEFAULTS, DEMAND DEPOSITS, DEPOSIT, DEPOSIT INSURANCE, DEPOSIT INSURANCE COVERAGE, DEPOSIT MONEY BANKS, DEREGULATION, DEVELOPING COUNTRIES, DIVIDEND, DIVIDEND RATE, DIVIDENDS, DUMMY VARIABLE, DUMMY VARIABLES, ECONOMIC INTEGRATION, ECONOMIC POLICY, ECONOMICS, EQUITY PORTFOLIOS, EQUITY PRICES, EQUITY RETURNS, EQUITY VALUE, EXPOSURE, EXPOSURE TO RISK, EXTERNALITIES, FACE VALUE, FEDERAL RESERVE, FEDERAL RESERVE BANK, FEDERAL RESERVE BANK OF NEW YORK, FINANCIAL CONTAGION, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL FRAGILITY, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL INTERMEDIARY, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL OPENNESS, FINANCIAL REFORM, FINANCIAL REFORMS, FINANCIAL REGULATION, FINANCIAL SECTOR, FINANCIAL STABILITY, FINANCIAL STRUCTURE, FINANCIAL STUDIES, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FINANCIAL TRANSACTIONS, FOREIGN INVESTORS, GLOBAL BANKING, GLOBALIZATION, GOVERNMENT POLICIES, HEDGE FUND, HEDGE FUNDS, ILLIQUIDITY, IMPLICIT GUARANTEE, INFLATION, INFLATION RISK, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL DIVERSIFICATION, INTERNATIONAL EQUITY, INTERNATIONAL FINANCIAL TRANSACTIONS, INTERNATIONAL MARKETS, INTERPOLATION, JURISDICTIONS, LIQUID ASSETS, LIQUIDITY CREATION, LIQUIDITY RISK, LONG TERM LIABILITIES, LONG-TERM LIABILITIES, MARKET CAPITALIZATION, MARKET CAPITALIZATIONS, MARKET DATA, MARKET EQUITY, MARKET TURNOVER, MARKET VALUE, MORAL HAZARD, MORTGAGE, NEGATIVE SHOCK, POLITICAL ECONOMY, PORTFOLIO, PORTFOLIOS, PRICE DISCOVERY, PRIVATE SECTOR DEVELOPMENT, PROBABILITY OF DEFAULT, PRODUCTIVITY, PRUDENTIAL REGULATION, PRUDENTIAL REGULATIONS, RAPID DEVELOPMENT, RECESSION, REGULATORY FRAMEWORKS, RESERVES, RISK DIVERSIFICATION, RISK PREMIUM, RISK SHARING, SAFETY NET, SECURITIES MARKETS, SECURITY MARKET, SHARE OF ASSETS, SHORT TERM DEBT, SHORT-TERM BORROWING, STOCK MARKET, STOCK MARKET CAPITALIZATION, STOCK MARKETS, STOCK PRICES, STOCK RETURNS, SYSTEMIC RISK, TRADE LIBERALIZATION, TREASURY, TREASURY BILL, TREASURY BILL RATE, TURNOVER RATIO, UNION, VALUE OF ASSETS, VOLATILITY, WORLD DEVELOPMENT INDICATOR, WORLD ECONOMY,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111108124433 http://hdl.handle.net/10986/3644
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