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Unformatted text preview:  Upper, C., and Worms, A. (2002). Estimating Bilateral Exposures in the German Interbank Market:
Is There a Danger of Contagion? Discussion Paper 09, Deutsche Bundesbank.
 Vuillemey, G., and Peltonen, T.A. (2013) Sovereign Credit Events and Their Spillovers to the
European Banking System — The Interplay Between Sovereign Bonds and CDS Holdings. Working
paper, European Central Bank.
 Wirch, J.L. (1999) Coherent Beta Risk Measures for Capital Requirements. Dissertation, Department of Statistics and Actuarial Sciences, University of Waterloo, Waterloo, Ontario, Canada.
 Yellen, J. (2013) Interconnectedness and Systemic Risk: Lessons from the Financial Crisis and
Policy Implications. Board of Governors of the Federal Reserve System, Washington, D.C. 31 Appendix: Application to European Banks
To provide some insight into how our theoretical results apply in practice, we draw on data from banks
that participated in the European Banking Authority’s (EBA) 2011 stress test. Detailed information on
interbank exposures needed to calibrate a full network model is not publicly available. But our results
do not depend on detailed network structure, so the information disclosed with the results of the stress
test give us most of what we need.
Ninety banks in 21 countries participated in the stress test. For each, the EBA reports total assets
and equity values as of the end of 2010. In addition, the EBA reports each bank’s total exposure at
default (EAD) to other ﬁnancial institutions. The EAD measures a bank’s total claims on all other
banks, so we take this as the size of each bank’s in-network assets. Subtracting this value from total
assets gives us ci , the size of the bank’s outside assets. For wi we use the equity values reported by the
EBA, which then allows us to calculate λi = ci /wi .
The only remaining parameter we need is βi , the fraction of a bank’s liabilities owed to other banks.
This information is not included in the EBA summary, nor is it consistently reported by banks in their
ﬁnancial statements. As a rough indication, we assume that each bank’s in-network liabilities equal its
in-network assets (though we will see that our results are fairly robust to this assumption).14 This gives
us βi = EAD/(assets-equity).
Some of the smallest banks have problematic data, so as a simple rule we omit the ten smallest. We
also omit any countries with only a single participating bank. This leaves us with 76 banks, of which
the 50 largest are included in Table 1. For all 76 banks, Table 2 includes assets, EAD, and equity as
reported by the EBA (in millions of euros), and our derived values for ci , wi , βi , λi . The banks are listed
by asset size in Table 1 and grouped by country in Table 2.
In Table 1, we examine the potential for contagion from the failure of each of the ﬁve largest banks,
BNP Paribas, Deutsche Bank, HSBC, Barclays, and Credit Agricole. Taking each of these in turn as
the triggering bank, we th...
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- Spring '11