Cross‐border financial surveillance: a network perspective

Cross‐border financial surveillance: a network perspective Purpose – The purpose of this paper is to show how network analysis can be used for effective cross‐border financial surveillance, which requires the monitoring of direct and indirect systemic linkages. Design/methodology/approach – This paper 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, the authors 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. Findings – Finally, the authors discuss how some of the limitations of the 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. Originality/value – This paper is one of the very few to take a cross‐border perspective on financial networks. It is also unique in accounting for risk transfers and in proposing a methodology to include the analysis (and monitoring) of risk transfers into a network model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economic Policy Emerald Publishing

Cross‐border financial surveillance: a network perspective

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1757-6385
D.O.I.
10.1108/17576381111152191
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to show how network analysis can be used for effective cross‐border financial surveillance, which requires the monitoring of direct and indirect systemic linkages. Design/methodology/approach – This paper 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, the authors 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. Findings – Finally, the authors discuss how some of the limitations of the 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. Originality/value – This paper is one of the very few to take a cross‐border perspective on financial networks. It is also unique in accounting for risk transfers and in proposing a methodology to include the analysis (and monitoring) of risk transfers into a network model.

Journal

Journal of Financial Economic PolicyEmerald Publishing

Published: Aug 9, 2011

Keywords: International lending; Debt problems; International finance; International economics; International policy coordination and transmission; Macroeconomic aspects of international trade and finance; Banks; Other depository institutions; Micro finance institutions; Mortgages; Financial institutions and services; Financial economics

References

  • Liquidity risk and contagion
    Cifuentes, R.; Ferrucci, G.; Shin, H.
  • Cross‐border exposures and financial contagion
    Degryse, H.; Elahi, M.A.; Penas, M.F.
  • Network models and financial stability
    Nier, E.; Yang, J.; Yorulmazer, T.; Alentorn, A.

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