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 rise Banks are relate through the interbank cook commercialise, participations like syndicated loans and deposit interest come in risk. The similarity in exposures carries the potence for general 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 tails 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 f or systemic risk is weak, while if e.g. the pupil distributions apply the potential is strong. Ã" 2004 Elsevier B.V. wholly rights reserved. JEL classi?cation: G21; G28 Keywords: Bank linkages; Fragility and systemic blow; Multi-variate extreme cherish analysis; Asymptotic addiction and independence * Address: Tinbergen Institute, Erasmus University Rotterdam, P.

O. cuff 1738, Rotterdam 3000 DR, The Netherlands. E-mail address: cdevries@few.eur.nl URL: hypertext transfer protocol://www.few.eur.nl/ flock/cdevries/. 0378-4266/$ - see front matter Ã" 2004 Elsevier B.V. All rights reserved. inside:10.1016/j.j bank?n.2004.08.003 804 C.G. De Vries ! / Journal of Banking & Finance 29 (2005) 803825 1. Introduction The asset sides of the bank equipoise 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, deal to a chain reaction in the interbank market. Similarly, a failure by a large...If you want to get a replete(p) essay, order it on our website: OrderCustomPaper.com

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