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Systemic Risks Assessment and Systemic Events Prediction: Early Warning System Design for the Czech Republic
Žigraiová, Diana ; Jakubík, Petr (advisor) ; Doležel, Pavel (referee)
This thesis develops an early warning system framework for assessing systemic risks and for predicting systemic events, i.e. periods of extreme financial instability with potential real costs, over the short horizon of six quarters and the long horizon of twelve quarters on the panel of 14 countries both advanced and developing. Firstly, Financial Stress Index is built aggregating indicators from equity, foreign exchange, security and money markets in order to identify starting dates of systemic financial crises for each country in the panel. Secondly, the selection of early warning indicators for assessment and prediction of systemic risks is undertaken in a two- step approach; relevant prediction horizons for each indicator are found by means of a univariate logit model followed by the application of Bayesian model averaging method to identify the most useful indicators. Next, logit models containing useful indicators only are estimated on the panel while their in-sample and out-of-sample performance is assessed by a variety of measures. Finally, having applied the constructed EWS for both horizons to the Czech Republic it was found that even though models for both horizons perform very well in-sample, i.e. both predict 100% of crises, only the long model attains the maximum utility of 0,5 as...
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Banking Regulation: Assessment and Simulation of Regulatory Measures
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on international banking regulation, particularly the capital adequacy requirements known as the Basel Accords. In the first part, we study the rationale for regulating the banks and describe the evolution of the Basel Accords, including the newly presented measures known as Basel III. The main conclusion of this part is that the regulation is heavily shaped by the banks themselves and does not always serve the best for protecting the financial system. In the second part dedicated to systemic risk modelling, we first introduce the used methodology and then build an agent-based model which enables us to simulate the impacts of various types of negative shocks given various settings of the banking system and the regulatory environment, including the capital and liquidity measures. Our simulations show firstly that sufficient capital buffers are crucial for systemic stability, secondly that the discretionary measures have little effect once a crisis breaks out and thirdly that liquidity measures are a relevant regulatory tool.
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Stress testing of banks in the United Kingdom
Jíša, Ondřej ; Blahová, Naděžda (advisor) ; Cibulka, Jakub (referee)
This bachelor thesis deals with the concept of stress testing the UK banking system. The first part examines used approaches to stress testing, summarises existing development in this area and describes individual measured risks. It is therefore a theoretical basis for an understanding of the second part. The second part is dedicated to the specific implementation of stress testing in the British economy. The results of stress tests from years 2014 and 2015 are analysed in this part. The thesis also includes a comparison of UK stress test 2014 with EU-wide stress test carried out in the same year. The conclusion includes a contemplation of future development of stress testing.
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Bank stress testing
Vorlíček, Jaroslav ; Blahová, Naděžda (advisor) ; Brada, Jaroslav (referee)
This thesis deals with stress testing of the banking sector. Stress tests are a set of analytical tools used to test the resilience and financial stability of the banking sector. At the beginning of the work financial stability and systemic risk impact not only in the form of sys-temically important financial institutions are discussed. Followed by a chapter on stress tests, which describes historic development of stress testing approaches to testing of individual banking risks and their implementation in the form of stress testing. Stress testing methodo-logy is described primarily from the perspective of the Czech National Bank, the importance of banking regulation and supervision in Basel III is also presented. In the final chapter of the thesis there are commented results of Czech National Bank's stress tests, and EU wide stress tests 2014, launched in cooperation with European Banking Authority, European Central Bank and the European Systemic Risk Board.
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Shadow banking and its impact on the stability of the financial markets
Náhlovský, David ; Blahová, Naděžda (advisor) ; Pour, Jiří (referee)
This diploma thesis is focused on shadow banking and its impact on the financial markets. The first section defines shadow banking and offers an overview of its instruments and activities with focus on the advantages and risks related to securitization, repurchase agreements and money market funds. The second section begins with an overview of systemic risk emerging from shadow banking activities. Substantial part of the thesis is dedicated to measurement of the shadow banking sector size based on methods of Financial Stability Board. The thesis concludes with an overview of current regulatory progress in transforming shadow banking into resilient market-based finance.
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Using of Macroprudential Policy and Risk Indicarors for Financial Markets Regulation
Šimáček, Milan ; Daňhel, Jaroslav (advisor) ; Musílek, Petr (referee) ; Řežábek, Pavel (referee)
This dissertation provides a complex study of systemic financial risk and its quantification. In the first part, the paper summarizes the main assumptions and tools of macroprudential policy, which became an important regulatory policy after the financial crisis of 2007-2009. The main parts of the paper deal with the construction of indicators of financial systemic risk and stress, where the paper distinguishes the quantitative expression of the contemporaneous financial stress from the continually developing systemic risk. The paper analyzes several methods of financial stress index construction, whose main task is to identify the contemporaneous rate of risk in different sectors of financial system using market prices of assets. The outcome of the paper is the identification and historical description of periods of heightened financial stress and the recognition of a regional character of the periods of stress. Apart from the index of the contemporaneous stress of financial system, the paper brings a systemic risk indicator, which captures the development of systemic risk in time, and which is a suitable leading indicator for the identification of periods of financial stress. The systemic risk indicator has identified, with a lead of two to three years, the increasing risk of the banking sectors of the countries in the region before the onset of the financial crisis of 2007-2009. In the conclusion, the paper points out the suitability of both indicators for the calculation of the amount of countercyclical capital buffer used in the new Basel III measures.
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Změny v regulaci bankovnictví v EU po finanční krizi
Bažík, Martin
The theme of this thesis is to analyse changes regarding bank regulation implemented by the European Union before and after the financial crisis in 2008. The aim of this thesis is to provide a summary of changes in the bank regulation by European Union as a reaction on the financial crisis and most importantly to specify its impact on the systemic risk and on the supervision on national level. The first part focuses on causes of the financial crisis launched in the United States of America, its process and extension to countries of the European Union. The second part consists of a description of the bank regulation before crisis concentrating on the Basel I and Basel II and implementing its arrangements to the legal systems of the member states. In the third part the comparison between the bank regulation before and after the financial crisis and also the future of the European banking system and its regulation is presented. At the conclusion, the possible impact of the regulatory changes is analyzed.
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Collateral Composition, Diversification Risk, and Systemically Important Merchant Banks
Derviz, Alexis
We study the impact of collateral diversification by non-financial firms on systemic risk in a general equilibrium model with standard production functions and mixed debt-equity financing. Systemic risk comes about as soon as firms diversify their collateral by holding claims on a big wholesale bank (called merchant bank in the paper) whose asset side includes claims on the same producer set. The merchant bank sector proves to be fragile (has a short distance to default) regardless of competition. In this setting, the policy response, consisting in official guarantees for the merchant bank’s liabilities, entails considerable government loss risk. An alternative without the need for public sector involvement is to encourage systemically important merchant banks to introduce a simple bail-in mechanism by restricting their liabilities to contingent convertible bonds. This line of regulatory policy is particularly relevant to the containment of systemic events in globally leveraged economies serviced by big international banks outside host country regulatory control.
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Systemically Important Banks in the Context of Financial Stability
Buchta, Martin ; Půlpánová, Stanislava (advisor) ; Hradil, Dušan (referee)
A failure of systemically important bank was up to the present time in most cases avoided through providing financial support by government because there were concerns about destroying the financial stability followed by decline in economic activity because of size, interconnectedness and limited substitutability of the failing bank. However, the implicit governmental guarantees for systemically important banks create many distortions in an economy which are desirable to eliminate. Considering restriction of moral hazard, no increase in systemic risk and preservation of social benefits of G-SIBs the parallel implementation of higher capital requirements and recovery and resolution policy seems to be the most effective measure from proposed regulatory measures for systemically important banks. The future benefits and costs of these measures will be dependent in a high degree on the form and way in which the new rules will be incorporated by governments to their national regulatory frameworks.
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Analysis of systemic risk in the context of the financial systems stability surveillance
Cipková, Dagmara ; Půlpánová, Stanislava (advisor) ; Coufal, Libor (referee)
Diploma thesis deals with the issue of systemic risk and its impact on the financial system. In terms of the explanation of the individual regularities analyses principles of systemic risk and its impact on the financial sector. The first part of this work is dedicated to a complex analysis of the systemic risk sources and a description of different measurement methods among others also dedicated to detection of systemically important institutions. The analytical part demonstrates an application of one of the model for systemic risk measurement on the real data from the United States of America between years 1990 and 2011 and the analysis of the newly adopted Dodd-Frank Act regulation. The main merit of this work is to describe and evaluate the complex perspective of the systemic risk, which is a prerequisite for its successful application and management.
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