We propose a method for measuring the systemic importance of interconnected banks. In order to capture contributions to system-wide risk, our measure accounts fully for the extent to which a bank (i) propagates shocks across the system and (ii) is vulnerable to propagated shocks. An empirical...

This paper reviews the debt service ratio (DSR) as a theoretically well-grounded indicator of systemic risk. The DSR has the desirable feature that it fluctuates around a stable level which makes its early warning signals easy to understand and communicate. In contrast, current early warning...