Collateral Composition, Diversification Risk, and Systemically Important Merchant Banks

0433271 - ÚTIA 2015 RIV US eng J - Článek v odborném periodiku
Derviz, Alexis
Collateral Composition, Diversification Risk, and Systemically Important Merchant Banks.
Journal of Financial Stability. Roč. 14, Special Issue (2014), s. 23-34. ISSN 1572-3089. E-ISSN 1878-0962
Grant CEP: GA ČR GA13-11983S
Institucionální podpora: RVO:67985556
Klíčová slova: collateral * systemic risk * merchant bank * CoCo
Kód oboru RIV: AH - Ekonomie
Impakt faktor: 1.506, rok: 2014
http://library.utia.cas.cz/separaty/2014/E/derviz-0433271.pdf

The impact of collateral diversification by non-financial firms on systemic risk is studied 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 (merchant) bank 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.
Trvalý link: http://hdl.handle.net/11104/0238368