Systemic Risk: A Survey

93 Pages Posted: 29 Jan 2001

See all articles by Olivier de Bandt

Olivier de Bandt

Banque de France - Economic Study and Research Division

Philipp Hartmann

European Central Bank (ECB); Centre for Economic Policy Research (CEPR) - International Macroeconomics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2000


This Paper develops a broad concept of systemic risk, the basic economic concept for the understanding of financial crises. It is claimed that any such concept must integrate systemic events in banking and financial markets as well as in the related payment and settlement systems. At the heart of systemic risk are contagion effects, various forms of external effects. The concept also includes simultaneous financial instabilities following aggregate shocks. The quantitative literature on systemic risk, which has evolved swiftly in the last couple of years, is surveyed in the light of this concept. Various rigorous models of bank and payment system contagion have now been developed, although a general theoretical paradigm is still missing. Direct econometric tests of bank contagion effects seem to be mainly limited to the United States. Empirical studies of systemic risk in foreign exchange and security settlement systems appear to be non-existent. Moreover, the literature surveyed reflects the general difficulty in developing empirical tests that can make a clear distinction between contagion in the proper sense and joint crises caused by common shocks, rational revisions of depositor or investor expectations when information is asymmetric ('information-based' contagion) and 'pure' contagion as well as between 'efficient' and 'inefficient' systemic events.

Keywords: Banking crises, contagion, currency crises, financial markets, financial stability, payment and settlement systems, systemic risk

JEL Classification: G12, G21, G29

Suggested Citation

de Bandt, Olivier and Hartmann, Philipp, Systemic Risk: A Survey (December 2000). Available at SSRN:

Olivier De Bandt (Contact Author)

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
(33 1) 42 92 28 80 (Phone)
(33 1) 42 92 27 66 (Fax)

Philipp Hartmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
(49 69) 1344 7356 (Phone)
(49 69) 1344 8553 (Fax)

Centre for Economic Policy Research (CEPR) - International Macroeconomics

United Kingdom

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