Risk Spillovers and Interconnectedness between Systemically Important Institutions

69 Pages Posted: 16 May 2020 Last revised: 8 Sep 2021

See all articles by Alin Marius Andries

Alin Marius Andries

Alexandru Ioan Cuza University of Iasi; Romanian Academy - Institute for Economic Forecasting

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Nicu Sprincean

Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iași; National Institute for Economic Research, Romanian Academy

Radu Tunaru

University of Sussex

Date Written: May 9, 2020

Abstract

In this paper we gauge the degree of interconnectedness and quantify the linkages between global and other systemically important institutions, and the global financial system. We document that the two groups and the financial system become more interconnected during the global financial crisis when linkages across groups grow. In contrast, during tranquil times linkages within groups prevail. Global systemically important banks (G-SIBs) contribute most to system-wide distress but are also most exposed. There are more links coming from G-SIBs to other systemically important institutions (O-SIIs) than the other way around, confirming the role of G-SIBs as major risk transmitters in the financial system. The two groups and the global financial system tend to co-vary for periods up to 60 days Prior to their official designation as G-SIBs or O-SIIs, the prevalent news sentiment about these institutions (we measure with a textual analysis) was negative. Importantly, the systemic importance and exposure of G-SIBs and O-SIIs is perceived differently by the Financial Stability Board (FSB) and the European Banking Authority (EBA).

Keywords: systemic risk, interconnectedness, bank networks, Bayesian graphical VAR, textual analysis

JEL Classification: G21; D85; G01

Suggested Citation

Andries, Alin Marius and Ongena, Steven R. G. and Sprincean, Nicu and Tunaru, Radu, Risk Spillovers and Interconnectedness between Systemically Important Institutions (May 9, 2020). Swiss Finance Institute Research Paper No. 20-40, Available at SSRN: https://ssrn.com/abstract=3597962 or http://dx.doi.org/10.2139/ssrn.3597962

Alin Marius Andries

Alexandru Ioan Cuza University of Iasi ( email )

Bvd. Carol nr. 22
Iasi, 700505
Romania

HOME PAGE: http://www.feaa.uaic.ro/faculty/marius-alin-andries/

Romanian Academy - Institute for Economic Forecasting ( email )

Calea 13 Septembrie nr. 13
Bucharest, 050711
Romania

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nicu Sprincean

Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iași ( email )

Carol I Blvd, No 11
Iasi, 700506
Romania

HOME PAGE: http://www.uaic.ro

National Institute for Economic Research, Romanian Academy ( email )

Calea 13 Septembrie, Nr. 13
Bucharest, 050711
Romania

HOME PAGE: http://ince.ro/index.html

Radu Tunaru

University of Sussex ( email )

Jubilee
Brighton, BN1 9SL
United Kingdom

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