Basel III has aided system stability, interbank models suggest
Model predicts future crashes will not be total wipeout
Agent-based modelling of the interbank lending market shows post-2008 reforms should work as intended to reduce contagion in a future crisis. While the onset of a crisis may be faster, the forthcoming research finds it is less likely to happen, and would wipe out less of the banking system’s equity.
Using annual interbank exposure for the years from 2004 to 2013, the researchers ran 1,000 simulations for each year. In each simulation, randomly selected banks in the system received shocks of
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