Systemic risk and interconnectedness in Gulf Cooperation Council banking systems
Nowadays, financial interconnectedness is the main driver of systemic risk. Thus, there is a constant need for tools to assess and manage systemic risk. This paper offers an alternative model framework to measure systemic risk and examine interconnectedness between direct exposures across banking sy...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2020-03-01
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| Series: | Banks and Bank Systems |
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| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13267/BBS_2020_01_Nekhili.pdf |
| _version_ | 1818502536757248000 |
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| author | Ramzi Nekhili |
| author_facet | Ramzi Nekhili |
| author_sort | Ramzi Nekhili |
| collection | DOAJ |
| description | Nowadays, financial interconnectedness is the main driver of systemic risk. Thus, there is a constant need for tools to assess and manage systemic risk. This paper offers an alternative model framework to measure systemic risk and examine interconnectedness between direct exposures across banking systems in the emerging markets of the Gulf Cooperation Council (GCC). To ensure consistency and efficiency of systemic risk estimates and to capture its multifaceted nature, the methodology measures systemic risk using a combination of Filtered Historical Simulation and nonparametric regression and then examines the interconnectedness using a network analysis. The results reveal that shocks originating in the banking systems in Saudi Arabia may potentially cause a cascade of failures in the banking systems of most GCC countries. The banking system in Oman, however, is robust enough to withstand any ripple effect from adverse shocks affecting GCC’s major banking systems. Such results present some policy implications for regulators and supervisors and may benefit asset managers and investors in making portfolio allocation decisions. |
| first_indexed | 2024-12-10T21:11:35Z |
| format | Article |
| id | doaj.art-0aaa2f8024884a6385a55f4380afb840 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-12-10T21:11:35Z |
| publishDate | 2020-03-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-0aaa2f8024884a6385a55f4380afb8402022-12-22T01:33:28ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742020-03-0115115816610.21511/bbs.15(1).2020.1513267Systemic risk and interconnectedness in Gulf Cooperation Council banking systemsRamzi Nekhili0https://orcid.org/0000-0001-8629-2654Ph.D., Dean, Department of Accounting and Finance, College of Administrative Sciences, Applied Science UniversityNowadays, financial interconnectedness is the main driver of systemic risk. Thus, there is a constant need for tools to assess and manage systemic risk. This paper offers an alternative model framework to measure systemic risk and examine interconnectedness between direct exposures across banking systems in the emerging markets of the Gulf Cooperation Council (GCC). To ensure consistency and efficiency of systemic risk estimates and to capture its multifaceted nature, the methodology measures systemic risk using a combination of Filtered Historical Simulation and nonparametric regression and then examines the interconnectedness using a network analysis. The results reveal that shocks originating in the banking systems in Saudi Arabia may potentially cause a cascade of failures in the banking systems of most GCC countries. The banking system in Oman, however, is robust enough to withstand any ripple effect from adverse shocks affecting GCC’s major banking systems. Such results present some policy implications for regulators and supervisors and may benefit asset managers and investors in making portfolio allocation decisions.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13267/BBS_2020_01_Nekhili.pdffiltered historical simulationinterconnectednessnetwork analysisnonparametric regressionsystemic risk |
| spellingShingle | Ramzi Nekhili Systemic risk and interconnectedness in Gulf Cooperation Council banking systems Banks and Bank Systems filtered historical simulation interconnectedness network analysis nonparametric regression systemic risk |
| title | Systemic risk and interconnectedness in Gulf Cooperation Council banking systems |
| title_full | Systemic risk and interconnectedness in Gulf Cooperation Council banking systems |
| title_fullStr | Systemic risk and interconnectedness in Gulf Cooperation Council banking systems |
| title_full_unstemmed | Systemic risk and interconnectedness in Gulf Cooperation Council banking systems |
| title_short | Systemic risk and interconnectedness in Gulf Cooperation Council banking systems |
| title_sort | systemic risk and interconnectedness in gulf cooperation council banking systems |
| topic | filtered historical simulation interconnectedness network analysis nonparametric regression systemic risk |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13267/BBS_2020_01_Nekhili.pdf |
| work_keys_str_mv | AT ramzinekhili systemicriskandinterconnectednessingulfcooperationcouncilbankingsystems |