Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110806
Authors: 
Demange, Gabrielle
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5307
Abstract: 
Interbank claims are a concern to regulators as they might facilitate the dissemination of defaults and generate spill-over effects. Building on a simple model, this paper introduces a measure of the spill-over effects that a bank generates when it defaults. The measure is based on an explicit criterion, the aggregate debt repayments, and is bank’s specific, affected by the bank’s characteristics and links to other banks. Such measure can be useful to a regulator to determine in which banks cash should be injected during a default episode or to evaluate the impact of raising capital before the occurrence of default. The approach applies more generally to a system of entities that are linked through financial claims. This is illustrated to evaluate the consolidated foreign claims of 10 EU countries.
Subjects: 
default
contagion
systemic risk
financial linkages
intervention policy
JEL: 
G01
G21
G28
Document Type: 
Working Paper

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