In this paper, we develop a methodology to assess potential losses to the government that could arise from bank failures. The approach is intended to be simple, parsimonious, and used in real time. It generates an index that we call the banking sector contingent liability index (BCLI), based on...

The recent financial crisis has underscored the importance of contingent liabilities for sovereign risk management. However, quantifying contingent liabilities remains a difficult task and, partly as a result, they continue to be recognized as a liability only when the contingency materializes....