TY - JOUR
T1 - Systemic Risk Measures and Regulatory Challenges
AU - Ellis, Scott
AU - Sharma, Satish
AU - Brzeszczyński, Janusz
PY - 2021/12/8
Y1 - 2021/12/8
N2 - This paper discusses different definitions of systemic risk and identifies the challenges, which regulators face in addressing this phenomenon. We conducted a systematic literature review of 4859 abstracts to categorize the various methodologies developed to measure systemic risk. In total, 60 systemic risk measures proposed post-2000 have been critically appraised to inform academics and regulators of their practical applications and model vulnerabilities. This review suggests that most of these methods focus on individual financial institutions rather than on system stability. Those methodologies directly reflect the current regulations, which aim to ensure individual institutions’ soundness. As macro-prudential regulation evolves, policy-makers face the issues of understanding contagion and how regulations should be implemented. This paper also discusses new systemic risk and regulatory challenges resulting from the current COVID-19 pandemic.
AB - This paper discusses different definitions of systemic risk and identifies the challenges, which regulators face in addressing this phenomenon. We conducted a systematic literature review of 4859 abstracts to categorize the various methodologies developed to measure systemic risk. In total, 60 systemic risk measures proposed post-2000 have been critically appraised to inform academics and regulators of their practical applications and model vulnerabilities. This review suggests that most of these methods focus on individual financial institutions rather than on system stability. Those methodologies directly reflect the current regulations, which aim to ensure individual institutions’ soundness. As macro-prudential regulation evolves, policy-makers face the issues of understanding contagion and how regulations should be implemented. This paper also discusses new systemic risk and regulatory challenges resulting from the current COVID-19 pandemic.
KW - Systemic Risk
KW - Systematic Literature Review
KW - Data Requirements
KW - Macro-prudential Regulation
KW - COVID-19 Pandemic
U2 - 10.1016/j.jfs.2021.100960
DO - 10.1016/j.jfs.2021.100960
M3 - Article
VL - 61
JO - Journal of Financial Stability
JF - Journal of Financial Stability
SN - 1572-3089
M1 - 100960
ER -