Systemic risk
The systemic risk (also: systemic risk ) is in the economy , a risk that the function or survival of an entire economic system can affect.
General
While the specific risk or individual risk only affects certain system participants in isolation without endangering the system as a whole, the system risk spreads to other economic subjects or systems in the form of a domino effect through spill-over or the contagion effect . So for example, have in the banking system , some net payment systems because of the delayed finality of payments the vulnerability on that if a participant's debit balance can not meet all concerning him transactions from the clearing must be removed afterwards ( English unwinding ), whereby the counterparties that participant payments missing intended for the settlement of claims . As a result, there are liquidity problems not only for one participant, but for all of its counterparties.
Systemic risk
Systemic risks are inherent in all complex technical and organizational systems and are difficult to predict due to the unclear causal relationships in the system (cf. Charles Perrow , "Normal Accidents").
In the financial sector, there is a systematic risk that the financial collapse of one market participant will spill over to other, originally legally and economically independent market participants and ultimately result in the functional collapse of essential parts or the entire financial system . From an economic perspective, systematic risk is a negative external effect of financing activities on the capital markets. Every not only local financial crisis arises from the realization of systemic risks. This effect requires an initial event and transmission channels.
The systemic risk has been legally defined since the global financial crisis that began in 2007 . Systemic risk is the risk of a disruption in the financial system that can have serious negative effects on the financial system and the real economy ( Section 1 (33 ) of the KWG ).
Initial event
The starting point for the realization of systematic risks is always an initial event unexpected by the market participants . It is regularly located with (a) single market participant (s). Adverse shocks that hit an economy as a whole only have a preparatory effect in such a way that pressure to adjust arises which some market participants cannot cope with in the necessary time. Other events (e.g. falsification of the balance sheet , discovery of serious (unintentional) incorrect valuations) that have a significant and lasting impact on the asset, financial and earnings position of a market participant because they lead to massive write-offs of receivables or the need for value adjustments , are suitable initial events.
Real transmission channels
The economic effects of initial events can initially be transferred via existing legal relationships between the market participants - in particular contractual relationships . Contracts that have future services as their object always involve the risk that a contracting party will not or cannot provide the service at the agreed time ( counterparty risk of default or risk of performance ). For the contractual partner, there is then a need for value adjustments, which affects the balance sheet in the form of a loss. The importance of this transmission channel increases with increasing amounts.
Informational transmission channels
In addition, there are informational transmission channels. Here, shareholders and creditors (and in the case of credit institutions also: depositors) draw conclusions about the financial consequences for their contractual partner due to the failure of a market participant. If the information is incomplete , they close gaps in knowledge by forming (pessimistic) expectations and claim to recognize an economic connection to the failed market participant, although objectively this connection does not necessarily have to exist. The starting point is often the similarity of the business model
- example
If a credit institution fails, depositors tend to assume economic connections to other institutions and tend to withdraw their deposits, which in the worst case can lead to a bank run .
This transmission channel can also be fed by herd behavior , in which uninformed actors (mis) interpret the uninformed actions of others as informed actions and orient their own actions accordingly. The widespread loss of trust among market participants, which can lead to a liquidity crisis in the market , can also be interpreted - at least in the early phase - as a type of herd behavior.
- A classic bank rush (rush to the cash desk of a bank that can ultimately no longer meet the depositors' requests for disbursement and gets into liquidity difficulties) represents a mixture of herd behavior and pessimistic expectation formation due to the similarity of the business models between an institution that has already failed or at least is in danger of failure and the bank own dar.
Risk Defense Strategies
Financial market participants make great efforts to adapt specific risks to their own risk-bearing capacity . You avoid cluster risks and diversify risks in your portfolio (see diversification ). By cleverly combining the individual risks in a portfolio, the overall risk of the portfolio (see portfolio theory ) can be reduced to a non-diversifiable residual risk (the systematic risk). The term “systematic risk” is also used for this in portfolio theory.
Measurement of systemic risk
Market participants and supervisory authorities around the world have a great interest in reliably measuring systemic risks. The qualitative and quantitative methods are still in their infancy. The core problem is the complexity of a constantly changing economic situation: contractual relationships are entered into and end over time; Expectations of other market participants are highly situational and difficult to forecast. Current measurement attempts can therefore only provide a vague approximation of the actual risk exposure. There is the CoVaR approach, network models and scoring models.
literature
- Christian Köhler: The admissibility of derivative financial instruments in companies, banks and municipalities: An economic and legal analysis , p. 171 ff., Mohr Siebeck, ISBN 978-3-16-151928-4
- Expert Council, Annual Report 2009/2010, p. 142 ff.
- Systemic Risk as a Perspective for Interdisciplinary Risk Research , Focus Issue Technology Assessment, KIT Karlsruhe, Volume 20, December 3, 2011
- International Risc Governance Council (IRGC) (2010): The Emergence of Risks, Geneva
See also
Individual evidence
- ↑ Jürgen Krumnow / Ludwig Gramlich (eds.), Gabler Bank-Lexikon: Bank - Exchange - Financing , 2000, p. 282
- ^ Charles Perrow: Normal Accidents, Living with High Risk Technologies , Basic Books, USA, 1984.
- ^ Christian Köhler: The admissibility of derivative financial instruments in companies, banks and municipalities: An economic and legal analysis , p. 171, Mohr Siebeck, ISBN 978-3-16-151928-4
- ↑ Expert Council for the Assessment of Overall Economic Development (Ed.), Annual Report 2009/2010 , p. 137.
- ↑ Franklin Allen / Douglas Gale, Financial Contagion , in: Journal of Political Economy, Vol. 108, pp. 1 ff.
- ↑ Roger Lagunoff / Stacey Schreft, A Model of Financial Fragility , in: Journal of Economic Theory, Vol. 99, pp. 220 ff.
- ↑ Sandro Brusco / Fabio Castiglionesi, Liquidity coinsurance, moral hazard and financial contagion , in: Journal of Finance, Vol. 62, pp. 2275 ff.
- ↑ Prasanna Gai / Sujit Kapadia, Contagion in Financial Networks , in: Bank of England Working Paper, 2010, pp. 10 ff.
- ↑ Itzhak Gilboa / David Schmeidler, Maxmin Expected Utility with a Non-Unique Prior , in: Journal of Mathematical Economics, Vol. 18, p. 142.
- ^ Markus Konrad Brunnermeier / Tobias Adrian, CoVaR , Federal Reserve Bank of New York: Staff Report, 2011
- ↑ Council of Experts for the Assessment of Overall Economic Development (Ed.), Annual Report 2009/2010 , pp. 140–144.
- ↑ Council of Experts for the Assessment of Overall Economic Development (Ed.), Annual Report 2009/2010 , pp. 140–144.
