The Simple Economics Of Bank Fragility

diary of Banking & Finance 29 (2005) 803825 www.elsevier.com/locate/econbase The simple governmental economy of strand fragility C.G. De Vries * Tinbergen Instituut, Erasmus Universiteit Rotterdam, Rotterdam, The Netherlands De Nederlandsche Bank, Amsterdam, The Netherlands EURANDOM Eindhoven, The Netherlands Available online 2 October 2004 lift Banks are relate through the interbank bond commercialise, participations like syndicated loans and deposit interest come in risk. The similarity in exposures carries the say-so for systemic breakdowns. This potential is either strong or weak, depending on whether the linkages remain or wing asymptotically. It is shown that the linearity of the bank portfolios in the exposures, in combination with a condition on the tail of the peripheral distributions of these exposures, determines whether the potential for systemic risk is weak or strong. We show that if the exposures have marginal normal distributions the potential fo r systemic risk is weak, while if e.g. the pupil distributions apply the potential is strong. Ã" 2004 Elsevier B.V. all in all rights reserved. JEL classi?cation: G21; G28 Keywords: Bank linkages; Fragility and systemic also-ran; Multi-variate extreme appraise analysis; Asymptotic addiction and independence * Address: Tinbergen Institute, Erasmus University Rotterdam, P.

O. lash 1738, Rotterdam 3000 DR, The Netherlands. E-mail address: cdevries@few.eur.nl URL: hypertext transfer protocol://www.few.eur.nl/the great unwashed/cdevries/. 0378-4266/$ - see front matter Ã" 2004 Elsevier B.V. All rights reserved . inside:10.1016/j.jbank?n.2004.08.003 8! 04 C.G. De Vries / Journal of Banking & Finance 29 (2005) 803825 1. Introduction The asset sides of the bank equaliser sheets contain mutual exposures in the interbank deposit market and participations in syndicated loans. Therefore large losses due to exogenous factors, such(prenominal) as an operational failure within a bank, deport to a chain reaction in the interbank market. Similarly, a failure by a large...If you want to get a adequate essay, order it on our website: OrderCustomPaper.com

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