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Dadun > Depósito Académico > Facultad de Económicas y Empresariales > Departamento de Economía > DA - Economía - Working Papers > DA - Economía - Working Papers 2012 >

Short-term Wholesale Funding and Systemic Risk: A Global CoVaR Approach
Authors: López-Espinosa, G. (Germán)
 Moreno, A. (Antonio)
Rubia, A. (Antonio)
Keywords: Materias Investigacion::Economía y Empresa
Systemic importance
Liquidity risk
Macroprudential regulation
Global CoVaR approach
Issue Date: 2012
We use the CoVaR approach to identify the main factors behind systemic risk in a set of large international banks. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find weaker evidence that either size or leverage contributes to systemic risk within the class of large international banks. We also show that asymmetries based on the sign of bank returns play an important role in capturing the sensitivity of system-wide risk to individual bank returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee’s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
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