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Macroprudential policy instruments: a bulwark against interbank contagion risk
[Les instruments de politique macroprudentielle : un rempart contre les risques de contagion interbancaire]

Author

Listed:
  • Thibaut PIQUARD
  • Dilyara SALAKHOVA

Abstract

Financial institutions are connected among themselves through multiple contracts: loans, bilateral security holdings, derivatives contracts, etc. In normal times, these relationships allow for risk-sharing. However, in times of stress, they turn into channels of shock propagation, through solvency default cascades, funding shortages and asset-fire sales. Macroprudential policy aims to mitigate these effects using different instruments, such as higher capital surcharges for systemic institutions.Public authorities monitor in particular financial interconnections by exploiting information on the bilateral relationships between financial institutions. They notably take these elements into account in the stress tests applied to the entire financial system.

Suggested Citation

  • Thibaut PIQUARD & Dilyara SALAKHOVA, 2018. "Macroprudential policy instruments: a bulwark against interbank contagion risk [Les instruments de politique macroprudentielle : un rempart contre les risques de contagion interbancaire]," Bulletin de la Banque de France, Banque de France, issue 218.
    • Handle: RePEc:bfr:bullbf:2018:218:03
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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