Interconnectedness of Global Systemically-Important Banks and Insurers

58 Pages Posted: 25 Oct 2017

See all articles by Sheheryar Malik

Sheheryar Malik

International Monetary Fund (IMF)

TengTeng Xu

International Monetary Fund (IMF)

Date Written: September 2017

Abstract

Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness-i.e., among all GSIBs and GSIIs-tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.

Keywords: Equity prices, JEL Classification Numbers: G21, G22 and C32 Keywords: Global systemically important banks and insurers, connectedness, volatility, vector autoregression, Global systemically important banks and insurers, Time-Series Models, JEL Classification Numbers: G21 G22 and C32, Keywords: Global systemically important banks and insurers

JEL Classification: G21, G22, C32

Suggested Citation

Malik, Sheheryar and Xu, TengTeng, Interconnectedness of Global Systemically-Important Banks and Insurers (September 2017). IMF Working Paper No. 17/210, Available at SSRN: https://ssrn.com/abstract=3058595

Sheheryar Malik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

TengTeng Xu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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