Systemic risk analysis and SIFI detection: Mechanisms and measurement

Abstract

This paper introduces the relevance of systemic risk measurement in the financial system, and the related issue of identifying systemically important financial institutions (SIFIs), in an evolving regulatory framework. It goes on to perform a detailed review of systemic risk mechanisms (both in the short and medium run), highlighting the interaction between solvency and liquidity problems. The paper also discusses how systemic risk should be measured. Finally, the paper puts forward some high-level suggestions on the use of multi-layer network simulation to measure systemic risk.