Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/106795
Authors: 
Alter, Adrian
Craig, Ben
Raupach, Peter
Year of Publication: 
2015
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 03/2015
Abstract: 
We look at the effect of capital rules on a banking system that is connected through correlated credit exposures and interbank lending. The rules, which combine individual bank characteristics and interconnectivity measures of interbank lending, are to minimize a measure of system-wide losses. Using the detailed German Credit Register for estimation, we find capital rules based on eigenvectors to dominate any other centrality measure, followed by closeness. Compared to the baseline case, capital reallocation based on the Adjacency Eigenvector saves 14.6% in system losses as measured by expected bankruptcy costs.
Subjects: 
Capital Requirements
Centrality Measures
Contagion
Financial Stability
JEL: 
G21
G28
C15
C81
ISBN: 
978-3-95729-119-6
Document Type: 
Working Paper

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