Risk, systemic sometimes also system-relevant and systemic risk

The risk that the international financial system as a whole will suffer severe disruptions or even collapse, with the consequence that regular exchange transactions worldwide will also suffer. – Systemic risks basically reflect disruptions that occur when the rational behavior of individual market participants leads to undesirable dysfunction in the financial system as a result of interdependencies between business activities. A first source here is contagion effects. A second source of systemic risk is amplification mechanisms or spirals, such as the buildup and unwinding of leverage or the access and outflow of liquidity. This can occur, for example, when central banks create an oversupply of money or suck out liquidity in a jerky manner. – A systemic crisis occurred worldwide no later than October 2008, when the subprime crisis escalated into a global financial crisis, requiring international intervention in the market by central banks and many governments. It was not a single cause that led to this situation, which shook the global financial system for years, but the interplay of – a turnaround in the housing and mortgage market in the USA, – widespread neglect of liquidity risks, – a reversal in risk appetite with regard to new types of financial products that were often enough hardly transparent, and – unreserved trust in the judgment of rating agencies. – Smaller countries with a relatively high contribution of the financial sector to the gross domestic product – such as: Switzerland, Luxembourg – could get into a downward strudel (depressive tumble) due to the collapse of a major bank. At the time of the financial crisis in June 2009, the Swiss authorities therefore threatened to impose market share limits on the two big banks UBS and Credit Suisse or even to unbundle these institutions. – It is likely that the larger a bank is, the higher its systemic risk. This is because, relying on the state to rescue them in the worst case, large institutions will also take high risks. – However, this is often disputed and it is emphasized that systemic risks depend on exposure to financial products on global, intermeshed markets. Thus, to avoid systemic risk, regulators should focus their attention on the proliferation of opaque products, rather than more stringent supervision of large banks. – See bancassurance risk committee, contagion effects, supervision, macroprudential, Financial Stability Committee, bail-out, bank, systemic, banking hospital, Community Reinvestment Act, euphoria phase, event risk, G-sifis, domino effect, ESCB macroprudential research network, financial market collapse, Concurrency problem, Herd behavior, Home Mortgage Disclosure Act, Imponderables, Crisis, Systemic, Leaning against the wind, Lender of last resort, Product registration, Restructuring management, Risk culture, Solvency supervision, Subprime crisis, Systemic risk, Too big to fail principle, Trust. – Cf. Financial Stability Report 2010, pp. 56 et seq. (instruments for detecting systemic risk at the Deutsche Bundesbank; overviews; references), Financial Stability Report 2009, pp. 58 et seq. (on measuring systemic risk at banks; references). Financial Stability Report 2011, p. 78 (chart on the causes of systemic risks), Financial Stability Report 2012, p. 98 (continuing dangers posed by the collapse of globally interconnected institutions), ECB Monthly Report of February 2013, p. 106 f. (enumeration of systemic risks), BaFin Annual Report 2012, p. 42 ff. (on global efforts to contain systemic risks), and the respective BaFin Annual Report, chapter “International,” Deutsche Bundesbank Monthly Report of June 2013, p. 65 f. (national supervisory authorities may tighten requirements), Financial Stability Report 2013, p. 87 (systemic risks in the insurance industry; references).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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