WP 2004/10 Ágnes Lublóy: Systemic Risk Implications of the Hungarian Interbank MarketPrint
The paper deals with the systemic risk implications of the Hungarian interbank market. As a consequence of the mutual interbank credits, an initial failure of a bank can lead to subsequent failures. Among others this domino effect depends on the structure of the interbank market. The Hungarian interbank market is concentrated and can be viewed as a structure with multiple money centres. Fifteen big banks are playing the role of the money centres, 60% of the interbank transactions are settled among these fifteen banks, but in more than 95% of the interbank transactions at least one partner is one of those fifteen banks.
The paper examines the effects of idiosyncratic bank failures based on a simulation method. Different default definitions are used, market expectations and multiple failures of banks with same risk profile are also captured. Even under unrealistic scenarios the contagion is fairly limited both in absolute and relative terms, which can be explained with the limited interbank exposures of the Hungarian banks.
Available only in Hungarian.