BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 12/2012:
Measuring systemic funding liquidity risk in the Russian banking system
Irina Andrievskaya ()
Abstract: The 2007-2009 global financial crisis demonstrated the
need for effective systemic risk measurement and regulation. This paper
proposes a straightforward approach for estimating the systemic funding
liquidity risk in a banking system and identifying systemically critical
banks. Focusing on the surplus of highly liquid assets above due payments,
we find systemic funding liquidity risk can be expressed as the distance of
the aggregate liquidity surplus from its current level to its critical
value. Calculations are performed using simulated distribution of the
aggregate liquidity surplus determined using Independent Component
Analysis. The systemic importance of banks is then assessed based on their
contribution to variation of the liquidity surplus in the system. We apply
this methodology to the case of Russia, an emerging economy, to identify
the current level of systemic funding liquidity risk and rank banks based
on their systemic relevance.
Keywords: systemic risk; liquidity surplus; banking; Russia; (follow links to similar papers)
JEL-Codes: G21; G28; P29; (follow links to similar papers)
29 pages, June 18, 2012
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