The financial crisis of 2007-2008 highlighted the risks that liquidity spirals pose to financial stability. We introduce a novel method for studying liquidity spirals and use this method to identify spirals before stock prices plummet and funding markets lock up. We show that liquidity spirals...

We argue that the rapid asset growth of nonbank financial intermediaries (NBFIs) relative to banks is the outcome of transformations of risks between banks and NBFIs that increase the interconnectedness of the two sectors. These transformations are consistent with avoiding tighter, post-GFC bank...

Under which conditions do usability constraints for regulatory capital buffers emerge? To answer this question, we build a non-linear structural banking sector model with a minimum capital requirement that banks are not allowed to breach, and a capital buffer requirement (CBR) that banks can...

This paper examines the relevance of banks' exposure to climate transition risk in the interbank lending market. Using transaction-level data on repo agreements, we first establish that banks with higher exposure to transition risk face significantly higher borrowing costs. This premium is a...

This study examines the systemic operational risk in Morocco's banking sector using a Panel VAR model based on data from three banks over ten years. The model includes real GDP, interbank rate (TMP), and bank credit, alongside indicators of operational, credit, and liquidity risks. The Impulse...

This paper applies network analysis to examine the impact of non-bank financial institutions (NBFIs) and financial market stress on contagion risk within the interbank network. Using network-based simulations on euro area banks’ supervisory data, we find that banks’ strong capital and...

Palau’s financial system faces structural challenges that inhibit effective financial intermediation, mobilization of domestic savings, and payment system efficiency. The authorities have been striving to address these challenges through digital initiatives. While these initiatives are...

We propose a quantitative framework to track systemic risk arising from cyber vulnerabilities of the U.S. financial system. Synthesizing financial, economic, cyber, and network data that covers thousands of financial institutions and technological firms, we develop an index that tracks...

Money laundering poses a serious threat to financial stability and requires effective national frameworks for prevention. This study investigates how the quality of legal and institutional frameworks affects the effectiveness of national anti-money laundering (AML) systems and their implications...

Financial institutions face increased reputational, regulatory, and ethical risks as the frequency and complexity of Environmental, Social, and Governance (ESG) controversies increase. Whistleblowing mechanisms are essential in the context of institutional resilience and the mitigation of...

The interplay between government economic policy uncertainty (EPU) and bank risk remains a key concern in the financial stability literature. This study advances the field by examining the dynamic, time-varying impact of EPU on bank risk, explicitly differentiating between short- and long-term...

Using granular security-level data from bond funds domiciled in the US and the euro area, we identify a market-based risk-taking channel of monetary policy transmission via the credit-risk and the maturity structure of bond funds' portfolios. We measure credit risk at the fund level as the...

In this paper we employ the natural experiment of German Division and Reunification in order to study the effect of institutional reform on the decision to hold risky assets. We present empirical evidence indicating that even 16 years after German Reunification risky portfolios of East and West...

Businesses increasingly rely on algorithmic systems and machine learning models to make operational decisions about customers, employees, and counterparties. These "algorithmic operations" can improve efficiency but also concentrate liability in a small number of technically complex, drifting...

This study investigates credit unions' expansion into non-core lending and its association with risk and financial resilience. Using US credit union call report data from 1994 to 2024, we measure the share of purchased loans, lease receivables, and loans held for sale in non-core lending. We...

Conventional risk assessment frameworks usually define risk as a function of vulnerabilities and threats, but they frequently lack a single quantitative model that incorporates the unique features of each element. In order to close this gap, this paper creates a flexible, open, and theoretically...

In this paper, we analyse data from 493 listed banks across 28 countries to investigate the impact and mechanisms through which banks' derivatives holdings influence systemic risk. Our empirical results indicate that banks' derivatives holdings significantly increase systemic risk. Regarding the...

This study quantifies the impact of geopolitical risk on euro area banks using the 2025 EU-wide stress test, the first to include an explicit geopolitical scenario. Comparing outcomes with earlier stress tests, we find that geopolitical shocks measurably erode capital ratios, with smaller and...