Systemic risk measures and regulatory challenges

Ellis, Scott; Sharma, Satish; Brzeszczyński, Janusz

Abstract

This paper discusses different definitions of systemic risk and identifies the challenges, which regulators face in addressing this phenomenon. We conducted a systematic literature review of 4859 abstracts to categorize the various methodologies developed to measure systemic risk. In total, 60 systemic risk measures proposed post-2000 have been critically appraised to inform academics and regulators of their practical applications and model vulnerabilities. This review suggests that most of these methods focus on individual financial institutions rather than on system stability. Those methodologies directly reflect the current regulations, which aim to ensure individual institutions’ soundness. As macro-prudential regulation evolves, policy-makers face the issues of understanding contagion and how regulations should be implemented. This paper also discusses new systemic risk and regulatory challenges resulting from the current COVID-19 pandemic.

Citation

Ellis, S., Sharma, S., & Brzeszczyński, J. (2022). Systemic risk measures and regulatory challenges. Journal of Financial Stability, 61, Article 100960. https://doi.org/10.1016/j.jfs.2021.100960

• Journal Article Type: Article
• Acceptance Date: Dec 6, 2021
• Online Publication Date: Dec 8, 2021
• Publication Date: 2022-08
• Deposit Date: Apr 1, 2025
• Journal: Journal of Financial Stability
• Print ISSN: 1572-3089
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 61
• Article Number: 100960
• DOI: https://doi.org/10.1016/j.jfs.2021.100960
• Public URL: http://researchrepository.napier.ac.uk/Output/4220107