Systemic risk
Optimization of systemic risk: reallocation of assets based on bank networks
In this paper, the authors investigate the optimization of systemic risk based on DebtRank by considering two contagion channels: interbank lending and common asset holdings.
Held in suspense: late futures orders blamed for Covid meltdown
Buy-side use of average pricing contributed to rash of failed trades and give-ups last March
Banks’ borrowings off overseas shadow lenders picked up in Q3
Majority of liabilities are owed non-banks in developed countries
Smaller US banks grew faster than larger rivals in Q3
Lenders less than $1 billion in size increased loans 16% over the quarter
Structural systemic risk: evolution and main drivers
This paper analyzes how systemic risk structurally evolved between 2007 and 2017. The main contributions of the paper to the literature include the methodology, analysis and potential use for macroprudential policies.
Brazil’s BM&F in 1999: a central counterparty near-failure case?
The authors argue that, despite some concerns on systemic risk expressed by high-level Banco Central do Brasil officers, the (potential) defaults of Marka and FonteCindam would not have been sufficient to lead BM&F to a failure.
Parallel lines: EU begins fight over Basel output floor
Leaked plan to exclude buffers from floor would please EU banks, could anger Basel and US
US G-Sibs saw off-balance-sheet exposures fall post-Covid
OBS items now make up less than 18% of total exposures
Underwriting activity of US G-Sibs topped $3 trillion in Q3
JP Morgan increased debt transactions by 41% year-on-year alone
Having cut risk, Wells Fargo may win a lower G-Sib surcharge
The San Francisco-based bank has lowered its systemic risk score through 2020
Esma warns of UK-sized hole in Europe’s fund leverage radar
Executive at hedge fund AQR also urges reform of EU leverage measures to better assess risk
Regulators voice concerns over cloud risk
Risk USA: failure of big cloud service provider could cause “a very large shock”, says NY Fed exec
PNC to be king of US regional banks after BBVA tie-up
Merger unlikely to tip PNC into too-big-to-fail category
Almost G-Sibs: five banks near systemic designation
Chinese banks continue to grow systemic footprints
At global banks, underwriting activity surged in 2019
JP Morgan led the world with €459.3 billion of transactions
Top US banks have become less of a systemic risk, says FSB
JP Morgan relegated as the world’s most systemically important lender
Top US-based foreign banks shrink systemic footprints
US units of Barclays, Credit Suisse and Deutsche Bank have cut assets 40% since Q3 2016
Basis trades: a test case for regulating risky activities
FSOC is right to focus on dangerous behaviour, but Treasury meltdown reveals a complex chain of actors
Jerome Kemp on the skewed economics of clearing
Only Fed intervention prevented “a really big market disaster” during Covid, says derivatives veteran
Ex-Isda risk chief: ditch gross notional thresholds for clearing
10 years on, David Murphy says mandate should be rebased to exempt less risky firms
Credit swap portfolios contracted at systemic US banks in Q2
Sold notionals fell 8% over the three months to end-June
Systemic banks’ leverage exposures gyrated over H1
Temporary relief measures held down growth of exposures at US, Swiss lenders
Systemic US banks crushed cleared OTC notionals in Q2
Outstanding amounts fall 12 quarter-on-quarter
US bank systemic risk indicators stay elevated through Q2
Increase in exposures, short-term wholesale funding bump systemic risk scores higher at some firms