Comap: Mapping Contagion in the Euro Area Banking Sector

64 Pages Posted: 27 Aug 2019

See all articles by Giovanni Covi

Giovanni Covi

European Central Bank (ECB); University of Verona

Mehmet Gorpe

International Monetary Fund (IMF)

Christoffer Kok

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

This paper presents a novel approach to investigate and model the network of euro area banks' large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.

Keywords: Banking sector, Financial crises, Macroprudential policies and financial stability, Financial institutions, Central banks, Systemic Risk, Network Analysis, Interconnectedness, Large Exposures, Stress Test, Macroprudential Policy., euro area, fire-sale, large exposure, interbank, fire sale

JEL Classification: D85, G17, G33, L14, G21, K2, E63, E01, G2

Suggested Citation

Covi, Giovanni and Gorpe, Mehmet and Kok, Christoffer, Comap: Mapping Contagion in the Euro Area Banking Sector (May 2019). IMF Working Paper No. 19/102. Available at SSRN: https://ssrn.com/abstract=3442861

Giovanni Covi

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

University of Verona ( email )

Via dell'Artigliere, 8
Verona, 37129
Italy

Mehmet Gorpe (Contact Author)

International Monetary Fund (IMF) ( email )

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

Christoffer Kok

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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