Number of the records: 1
Collateral Composition, Diversification Risk, and Systemically Important Merchant Banks
- 1.0433271 - ÚTIA 2015 RIV US eng J - Journal Article
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
R&D Projects: GA ČR GA13-11983S
Institutional support: RVO:67985556
Keywords : collateral * systemic risk * merchant bank * CoCo
Subject RIV: AH - Economics
Impact factor: 1.506, year: 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.
Permanent Link: http://hdl.handle.net/11104/0238368
Number of the records: 1