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Identifying Vulnerabilities in Systemically-Important Financial Institutions in a Macro-Financial Linkages Framework

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  • Tao Sun

Abstract

This paper attempts to identify the indicators that can demonstrate the vulnerabilities in systemically important financial institutions. The paper finds that (i) indicators on leverage, liquidity, and business scope can help identify the differences between the intervened and non-intervened financial institutions during the subprime crisis; (ii) the expected default frequencies react positively to shocks to leverage, inflation, global financial stress, and global excess liquidity, and negatively to return on assets and equity prices; and (iii) leverage has been the most robust factor with a long-run causal effect on the expected default frequencies.

Suggested Citation

  • Tao Sun, 2011. "Identifying Vulnerabilities in Systemically-Important Financial Institutions in a Macro-Financial Linkages Framework," IMF Working Papers 2011/111, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/111
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    2. Betz, Frank & Oprică, Silviu & Peltonen, Tuomas A. & Sarlin, Peter, 2014. "Predicting distress in European banks," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 225-241.
    3. Katarzyna Kubiszewska, 2018. "Interdependence of Ratios in Banking Stability Pentagon (Wspolzaleznosc wskaznikow w Pieciokacie Stabilnosci Bankowej)," Research Reports, University of Warsaw, Faculty of Management, vol. 2(28), pages 65-79.
    4. Mr. Nicolas R Blancher & Ms. Srobona Mitra & Mrs. Hanan Morsy & Mr. Akira Otani & Tiago Severo & Ms. Laura Valderrama, 2013. "Systemic Risk Monitoring ("SysMo") Toolkit—A User Guide," IMF Working Papers 2013/168, International Monetary Fund.

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