Work detail

Interbank contagion under the Basel III regulatory framework

Author: Mgr. Chleboun Jakub
Year: 2012 - summer
Leaders: doc. PhDr. Ing. Ing. Petr Jakubík Ph.D. Ph.D.
Consultants:
Work type: Doctoral
Language: English
Pages: 95
Awards and prizes:
Link:
Abstract: This study assesses the impact of the Basel III regulatory framework on interbank contagion. It focuses
on the direct interbank contagion that spreads via interbank foreign claims among national banking
sectors. A balance sheet-based network model employs the quarterly consolidated banking statistics,
collected by the Bank for International Settlements, to simulate the consequences of credit and funding
shock under stressed market conditions. Compared to the Basel II, the Basel III regulatory framework
reduces the probability of interbank contagion (following a simulated default of one banking sector)
from 31% to 14% and lowers the impact of contagion by 63% in terms of average loss for a banking
sector. The simulations under both regulatory frameworks show that relatively smaller banking sectors
can trigger severe interbank contagion comparable to large banking sectors. Throughout the 2005-2009
period, the Basel III regulatory framework stabilizes the fluctuations of the scope of interbank contagion.
Downloadable: RT Chleboun

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance