Measuring Systemic Funding Liquidity Risk in the Russian Banking System

29 Pages Posted: 18 Jun 2012

See all articles by Irina Andrievskaya

Irina Andrievskaya

National Research University Higher School of Economics

Date Written: June 7, 2012

Abstract

The 2007-2009 global financial crisis demonstrated the need for effective systemic risk measurement and regulation. This paper proposes a straightforward approach for estimating the systemic funding liquidity risk in a banking system and identifying systemically critical banks. Focusing on the surplus of highly liquid assets above due payments, we find systemic funding liquidity risk can be expressed as the distance of the aggregate liquidity surplus from its current level to its critical value. Calculations are performed using simulated distribution of the aggregate liquidity surplus determined using Independent Component Analysis. The systemic importance of banks is then assessed based on their contribution to variation of the liquidity surplus in the system. We apply this methodology to the case of Russia, an emerging economy, to identify the current level of systemic funding liquidity risk and rank banks based on their systemic relevance.

Keywords: systemic risk, liquidity surplus, banking, Russia

JEL Classification: G21, G28, P29

Suggested Citation

Andrievskaya, Irina, Measuring Systemic Funding Liquidity Risk in the Russian Banking System (June 7, 2012). BOFIT Discussion Paper No. 12/2012, Available at SSRN: https://ssrn.com/abstract=2086316 or http://dx.doi.org/10.2139/ssrn.2086316

Irina Andrievskaya (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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