Asymmetric Systemic Risk

Bank of Canada Staff Working Paper

63 Pages Posted: 19 Oct 2022

See all articles by Radoslav Raykov

Radoslav Raykov

Bank of Canada

Consuelo Silva Buston

Pontificia Universidad Católica de Chile - School of Business

Date Written: September 8, 2022

Abstract

Bank regulation presumes risks spill over more easily from large banks to the banking system than
vice versa. Yet, we document that risk transmission is stronger in the system-to-bank direction, because different bank activities affect the flow of risk differently in each direction. We term this phenomenon asymmetric systemic risk, measure it with net exposure metrics, and explore the consequences and channels behind it. We show that high-net-exposure banks faced higher default risk during the 2008 crisis, and that trading activities and bank size were the main determinants of this net exposure, which increased default risk through trading income volatility.

Keywords: systemic risk, financial stability

JEL Classification: G10, G20

Suggested Citation

Raykov, Radoslav and Silva Buston, Consuelo, Asymmetric Systemic Risk (September 8, 2022). Bank of Canada Staff Working Paper, Available at SSRN: https://ssrn.com/abstract=4231630 or http://dx.doi.org/10.2139/ssrn.4231630

Radoslav Raykov (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

HOME PAGE: http://https://www.bankofcanada.ca/profile/radoslav-raykov/

Consuelo Silva Buston

Pontificia Universidad Católica de Chile - School of Business ( email )

Vicuna Mackenna 4860
Santiago
Chile

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
62
Abstract Views
297
Rank
658,666
PlumX Metrics