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Report
The shadow banking system: implications for financial regulation
The current financial crisis has highlighted the growing importance of the "shadow banking system," which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-based financial system, banking and capital market developments are inseparable: Funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. Growth in the balance sheets of these intermediaries ...
Report
CoVaR
We propose a measure for systemic risk, ?CoVaR, defined as the difference between the conditional value at risk (CoVaR) of the financial system conditional on an institution being in distress and the CoVaR conditional on the median state of the institution. Our ?CoVaR estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict systemic risk contribution. We provide out-of-sample forecasts of a countercyclical, forward-looking measure of systemic risk and show that the 2006:Q4 value of this measure would have predicted more than ...