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Understanding the impact of the financial technology revolution on systemic risk: Evidence from US and EU diversified financials

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  • Curcio, Domenico
  • D’Amico, Simona
  • Gianfrancesco, Igor
  • Vioto, Davide

Abstract

In this paper we first detect the impact of tech-driven downturns on US and EU diversified financials’ systemic risk measures (SRMs). Then, we study the relationship between these latter and the performance of BigTechs, FinTechs and cryptoassets, as proxied by the performance of specifically built market indexes. We find that equity related tech-driven downturns exacerbate systemic risk more than crypto ones. A better performance of BigTechs reduces financial systemic risk, with an increasing magnitude under tail conditions. The interconnectedness between FinTechs and traditional financial intermediaries might end up with an increase in systemic risk even under bullish circumstances. We provide useful insights in the perspective of financial institutions’ and supervisors’ integration of technology-driven risk analysis into their risk management procedures and prudential supervisory practices.

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  • Curcio, Domenico & D’Amico, Simona & Gianfrancesco, Igor & Vioto, Davide, 2024. "Understanding the impact of the financial technology revolution on systemic risk: Evidence from US and EU diversified financials," Research in International Business and Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000837
    DOI: 10.1016/j.ribaf.2024.102290
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    More about this item

    Keywords

    Systemic risk; Technology; FinTech; Crypto-assets; Financial stability;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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