Banks’ Joint Exposure to Market and Run Risk

By Alexander Copestake, Divya Kirti, Yang Liu

September 22, 2023

Preview Citation

Format: Chicago

Alexander Copestake, Divya Kirti, and Yang Liu. Banks’ Joint Exposure to Market and Run Risk, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Recent failures of US banks highlight that large liability withdrawals can damage capital positions—i.e., that liquidity risk and solvency risk interact. A simple risk assessment for banks in a wide group of countries finds sizable exposure to this interaction. This varies significantly across banks—primarily reflecting differences in cash buffers, capitalization, securities holdings and exposure to market risk—and is highly concentrated. Vulnerability is generally greater for banks in AEs due to lower cash buffers, securities holdings and capitalization. Within AEs—unlike in EMs—larger banks are most exposed, due to greater wholesale funding and thinner capital buffers. Estimated aggregate losses are substantial in some countries, reflecting a range of recent shocks.

Subject: Bonds, Financial institutions, Financial regulation and supervision, Market risk, Public debt, Securities, Sovereign bonds

Keywords: Bank assets, Bank data, Banks, Bonds, Deposit franchise, Global, Liquidity Risk, Low-COF bank, Market risk, Securities, Securities holding, Solvency Risk, Solvency risk interact, Sovereign bonds

Publication Details

Pages:

26
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2023/200
Stock No:

WPIEA2023200
ISBN:

9798400253966
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers