Preparing for the Next Financial Crisis

22 Notions

(de Bandt and Hartmann, 2019). In nancial economics, “systemic risk” is the

risk of a “systemic event”, i.e. of adverse events aecting a large share of the

nancial system, alienating partially or totally, but to a signicant extent, its

ability to exert its main functions, namely the provision of nancial services, the

channelling of savings to investment and the allocation of risk in the economy,

with macroeconomic and welfare consequences.

This denition is consistent with the one given above for nancial stability

(1.1), in the sense that it corresponds to the most severe and extreme cases of

nancial instability.

The economic literature highlights several forms of systemic events:

• Contagion eects (1.4.2).

• Common exposu ...