Tail systemic risk and contagion: Evidence from the Brazilian and Latin America banking network

Castro, Miguel Angel Rivera; Ugolini, Andrea; Zambrano, Juan Arismendi

doi:10.1016/j.ememar.2018.02.004

Cited by 16 publications

(6 citation statements)

References 40 publications

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“…For example, neither G-SIFIs from the same countries and regions are classified in the same group, nor are the G-SIFIs based on the same Bucket identified in the same group. In contrast to the studies of Billio et al (2012) and Rivera-Castro et al (2018), the topology of both standard network and tail network in the global banking system is highly complex and is not determined by either geographical conditions or economic fundamentals.…”

Section: Network Analysismentioning

confidence: 94%

“…In so doing, we can bridge systemic risk and idiosyncratic network interconnectedness within a dynamic framework. Although numerous studies have discussed the positive influence of network interconnectedness on systemic risk (Glasserman & Young, 2015; Rivera‐Castro et al, 2018), the parts of idiosyncratic network interconnectedness that work on systemic risk remain unclear. Notably, as Demirer et al (2018) and Chen et al (2020) argue, cross‐country and within‐country global bank connectedness exhibit a clear distinction.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The effects of financial contagions depend on the resilience of financial system (Allen & Douglas, 2000), which can be measured in terms of interconnectedness (Rivera‐Castro et al, 2018), connectivity (Diebold & Yılmaz, 2016) and network topology (Chen et al, 2020). To determine how idiosyncratic risk evolves into systemic risk, we develop an idiosyncratic network through the multivariate conditional Granger causality (G‐causality) method (Barnett & Seth, 2014; Barrett et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

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Systemic risk and idiosyncratic networks among global systemically important banks

Cui

Yang

2022

Int. J Fin Econ

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In this article, we investigate the role played by idiosyncratic networks in systemic risk transmission among global systemically important banks. To construct idiosyncratic networks, we employ the conditional Granger causality approach and find they are unstable in the short term and stable in the long term. Additionally, we visualise dynamic idiosyncratic networks and confirm that their evolutionary pattern is similar to that of systemic risk. Moreover, we further explore systemic risk and idiosyncratic networks at an individual level and determine that in‐degree and in‐strength measures negatively influence systemic risk. This indicates that a well‐connected idiosyncratic network in the banking system is prone to risk spillover and cause idiosyncratic contagion. The results of the network analysis indicate that global banking idiosyncratic networks are a complex system and can serve as a valuable reference for investors and policymakers.

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Section: Network Analysismentioning

confidence: 94%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Systemic risk and idiosyncratic networks among global systemically important banks

Cui

Yang

2022

Int. J Fin Econ

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“…Much of the empirical literature in this field focuses on examining co-movements in banking sector predominantly in Europe (Baele et al , 2004; Jokipii and Lucey, 2007; Alexandrou et al , 2011; Rughoo and Sarantis (2012, 2014); Ludwig and Sobański, 2014; Sehgal et al , 2016a) while few have examined the same for Asia (Mensah and Premaratne, 2017) and Gulf region (Maghyereh and Awartani, 2012). Related literature on impact of the Brazilian bank on Latin America was studied by Rivera-Castro et al (2018) who calculated the impact of the Brazilian tail systemic risk by creating a network of the risk transmission of the Latin America financial systems using copula models. Another related work on explaining banking stability in Sub Saharan Africa by Dwumfour (2017) reveal that banking spread is the main determinant of stability and the major means to achieve stability during crises periods.…”

Section: Introductionmentioning

confidence: 99%

Dynamics of banking sector integration in South Asia: an empirical study

Pandey

Sehgal

Ahmad

2019

IGDR

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Purpose Banks in the South Asian region are the fulcrum of economic growth and development as they provide means to development credit and working capital, trade and infrastructure finance and are seen as custodians of the trust in the financial system. This paper aims to study the nature of banking sector linkages for the region. Design/methodology/approach The dependence structure between deposits and lending rates individually for the banks of the South Asian countries are studied using time invariant and time varying family of copula functions. The degree of connectedness is further studied by Diebold and Yilmaz methodology. Findings Results indicate poor levels of banking integration in the region as the dependence parameter for both deposits and lending rates was around 0 for the sample countries, thereby confirming poor banking sector integration in the region. Practical implications Policymakers of the region are interested in the co-movements of the interest rates to understand the cross-sector risk management and any systemic risk pressures for the regional economies. Corporates in these countries are scouting out for competitive borrowing rates to lower their cost of capital. Social implications Rationale for examining the banking sector linkages is that the South Asian countries are at different stages of economic growth and development and this region in particular is the fastest growing region in the world and has largely increased its trade integration with the world albeit having lowest levels of intra-regional trade integration. Originality/value This is a first of a kind of studies to examine the banking sector linkages in South Asia.

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“…On the contrary,Rivera-Castro et al (2018) find that two of the largest Brazilian banks were the ones propagating global financial crisis' shock to the Brazilian banking system Cont et al (2010). argue that this could be avoided by applying capital requirements dependent also on interbank exposures,…”

mentioning

confidence: 98%

Systemic Banking Crises: The Relationship Between Concentration and Interbank Connections

Calef

2018

SSRN Journal

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In this paper I study the extent to which the nexus between concentration and interbank linkages affects financial stability, using data for a sample of 19,689 banks in 69 countries from 1995 to 2014. I find that high levels of interbank exposures decrease the probability of observing a systemic banking crisis, when the banking system is either highly concentrated or fragmented. The relationship between concentration and stability is found to be non-monotonic, as predicted by Martinez-Miera & Repullo (2010), although not U-shaped.

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Tail systemic risk and contagion: Evidence from the Brazilian and Latin America banking network

Cited by 16 publications

References 40 publications

Systemic risk and idiosyncratic networks among global systemically important banks

Systemic risk and idiosyncratic networks among global systemically important banks

Dynamics of banking sector integration in South Asia: an empirical study

Systemic Banking Crises: The Relationship Between Concentration and Interbank Connections

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