Risk Assessment for Banking Systems

Risk Assessment for Banking Systems Helmut Elsinger University of ViennaDepartment of Business StudiesAlfred Lehar University of ViennaDepartment of Business StudiesMartin Summer Oesterreichische NationalbankEconomic Studies Division We have to thank Ralf Dobringer, Bettina Kunz, Franz Partsch and Gerhard Fiam for their helpand support with the collection of data. We thank Michael Boss, Elena Carletti, Michael Crouhy, PhilDavis, Klaus D ullmann, Craig Furfine, Hans Gersbach, Charles Goodhart, Martin, Hellwig, EduardHochreiter, Patricia Jackson, George Kaufman, Elizabeth Klee, Markus Knell, David Llewellyn, TomMayer, Matt Pritsker, Gabriela de Raaij, Olwen Renowden, Isabel Schnabel, Hyun Song Shin, JohannesTurner, Christian Upper, Birgit Wlaschitz, and Andreas Worms for helpful comments. We also thankseminar and conference participants at OeNB, Technical University Vienna, Board of Governors of theFederal Reserve System, the IMF, University of Mannheim, the London School of Economics, the bank ofEngland, the FSA, the University of Victoria, the University of British Columbia, the 2002 WEA meetings,the 2002 European Economic Association Meetings, the 2002 European Meetings of the EconometricSociety, the 2002 CESifo workshop on Financial Regulation and Financial Stability, the 2003 AmericanFinance Association Meetings, and the 2003 European Finance Association Meetings for their views a

is insolvent. In this case it is assumed that creditor banks are rationed proportionally. Following Eisenberg and Noe (2001) we can formalize proportional rationing in case of default as follows: Denote by d ∈ RN + the vector of total obligations of banks towards the rest of the system i.e., we have d i = P j∈N l ij. Proportional sharing of ...

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  Bank, Insolvent

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