Chapter 14. Cross-Border Financial Surveillance: A Network Perspective
Author:
Marco A Espinosa-Vega https://isni.org/isni/0000000404811396 International Monetary Fund

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Language:
English
Print Publication Date:
23 Dec 2014
Keywords:
BOOK; IMF staff; balance sheet; BNP Paribas; credit growth; shortfall exercise; Stress testing; Loans; Credit risk; Nonperforming loans; Commercial banks; Global; Europe; Eastern Europe; Southern Europe; Africa

Abstract

Effective cross-border financial surveillance requires the monitoring of direct and indirect systemic linkages. This chapter illustrates how network analysis could make a significant contribution in this regard by simulating different credit and funding shocks to the banking systems of a number of selected countries. After that, we show that the inclusion of risk transfers could modify the risk profile of entire financial systems, and thus an enriched simulation algorithm able to account for risk transfers is proposed. Finally, we discuss how some of the limitations of our simulations are a reflection of existing information and data gaps and thus view these shortcomings as a call to improve the collection and analysis of data on cross-border financial exposures.

Contributor Notes

This chapter was previously published in the Journal of Financial Economic Policy (2011), Vol. 3, No. 3, pp. 182–205 (Espinosa-Vega and Solé, 2011). The authors are grateful to the following for their helpful comments and suggestions: Rama Cont, Sean Craig, Kay Giesecke, Kristian Hartelius, John Kiff, Laura Kodres, Lavan Mahadeva, Patrick McGuire, Diego Rodriguez-Palazuela, Carolynne Spackman (who also provided excellent research assistance), Thierry Tressel, Christian Upper, Götz von Peter, and seminar participants at the IMF, the Bank for International Settlements (BIS), the European Central Bank, the Bank of Japan, the Japanese Financial Services Agency, the Japanese Center for Economic Research, Bank Negara Malaysia, the South Africa Reserve Bank, the “Liquidity 2009 Conference” organized by E-MiD (Italy), and the First IMF Roundtable to Enhance Collaboration on Financial Stability Analysis. Graham Colin-Jones provided superb editorial assistance. The authors are also indebted to the BIS for the provision of data.
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Cover A Guide to IMF Stress Testing
A Guide to IMF Stress Testing
Methods and Models
Author:
Ms. Li L Ong
ISBN:
9781484368589
Publication Date:
23 Dec 2014
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781484368589.071
Pages:
612
Front Matter
Chapter 1. Stress Testing at the International Monetary Fund: Methods and Models
Part I: The Accounting-Based Approach
Section A. The Balance Sheet–Based Approach
Chapter 2. Introduction to the Balance Sheet–Based Approach to Stress Testing
Chapter 3. Stress Tester: A Toolkit for Bank-by-Bank Analysis with Accounting Data
Chapter 4. Into the Great Unknown: Stress Testing with Weak Data
Chapter 5. Next-Generation Applied Solvency Stress Testing
Chapter 6. Of Runes and Sagas: Perspectives on Liquidity Stress Testing Using an Iceland Example
Chapter 7. Next-Generation Systemwide Liquidity Stress Testing
Chapter 8. Systemic Bank Risk in Brazil: A Comprehensive Simulation of Correlated Market, Credit, Sovereign, and Interbank Risks
Chapter 9. Modeling Correlated Systemic Bank Liquidity Risks
Chapter 10. Review and Implementation of Credit Risk Models
Chapter 11. Bankers without Borders? Implications of Ring-Fencing for European Cross-Border Banks
Chapter 12. Conducting Stress Tests of Defined Benefit Pension Plans
Section B. The Network Analysis Approach
Part II: The Market Price-Based Approach
Section A. The Equity Indicators–Based Approach
Section B. The Extreme Value Theory Approach
Section C. The Contingent Claims Analysis Approach
Part III: The Macro-Financial Approach
Back Matter