IMF published a working paper on the interconnectedness among global systemically important banks (G-SIBs) and global systemically important insurers (G-SIIs). The paper examines connectedness among United States, European, and Asian G-SIBs and G-SIIs, using publicly available daily equity returns and intra-day volatility data from October 2007 to August 2016.
Results reveal strong regional clusters of return and volatility connectedness among G-SIBs and G-SIIs. Compared to Asia, selected G-SIBs and G-SIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—among all G-SIBs and G-SIIs—tends to rise during financial stress, which is corroborated by a balance-sheet-oriented systemic risk measure. The paper also demonstrates the significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, along with the important role of bank profitability and asset quality in driving bank-specific return connectedness. Interconnectedness among G-SIBs and G-SIIs has important financial stability implications.
Related Link: Working Paper (PDF)
Keywords: International, Banking, Insurance, G-SIB, G-SII, Interconnectedness, Financial Stability, Systemic Risk, IMF
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous ArticleFSI Publishes Executive Summaries on Latest Regulatory Standards
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.