Finding
The results suggest that sovereign and bank systemic risk are particularly interlinked in the United Kingdom.
Paper
On Bank Credit Risk: Systemic or Bank Specific? Evidence for the United States and United Kingdom
Abstract
We develop a multivariate credit risk model that accounts for joint defaults of banks and allows us to disentangle how much of banks’ credit risk is systemic. We find that the United States and United Kingdom differ not only in the evolution of systemic risk but, in particular, in their banks’ systemic exposures. In both countries, however, systemic credit risk varies substantially, represents about half of total bank credit risk on average, and induces high risk premia. The results suggest that sovereign and bank systemic risk are particularly interlinked in the United Kingdom.
Authors
Junye Li, Gabriele Zinna
Journal
Journal of Financial and Quantitative Analysis
copied to clipboard