The global financial crisis that started in mid-2007 illustrates the relevance of systemic risk. One key driver of the systemic instability that materialized in the crisis was the elevated level of stress in large banks. We use EVT to analyse the effect of size on banks' univariate and systemic...

The recent financial crisis proved that financial contagion could spread among countries resulting in disruptive effects. In this paper, by modeling and simulating banking system behavior and linkages across countries, we assess, based on data from the BIS and IMF, the possible outcome of...

Global banks use their global balance sheets to respond to local monetary policy. However, sources and uses of funds are often denominated in different currencies. This leads to a foreign exchange (FX) exposure that banks need to hedge. If cross‐currency flows are large, the hedging cost...

When central banks adjust interest rates, the opportunity cost of lending in local currency changes, but—in absence of frictions—there is no spillover effect to lending in other currencies. However, when equity capital is limited, global banks must benchmark domestic and foreign lending...

Using transaction-level data on foreign exchange (FX) forward contracts, we document large demand-driven heterogeneity in banks' dollar hedging costs. For identification, we exploit regulatory end-of-quarter reporting that penalizes banks' currency exposure with capital surcharges. Contracts...