Understanding Systemic Risk in Global Financial Markets

CHAPTER 5Systemic Risk Data

INTRODUCTION

The Credit Crisis revealed significant gaps in the data available for regulators and risk managers to identify vulnerabilities and emerging threats that ultimately led to the crisis. These gaps were widespread and related to insufficient information about individual financial institutions and a lack of data about interconnections across the financial system. Concerning the latter, the Credit Crisis illustrated how a shock or dislocation in one company, asset class, or region can quickly spread to other markets and firms across borders. Because of the catastrophic impact that historical crises have had on financial institutions and consumers, the need to close data gaps to enhance systemic risk measurement and monitoring has been a top priority for global regulators in recent years. This chapter will discuss some of the responses by regulators and policymakers in terms of new entities created to address data gaps, some of the new metrics developed to track the buildup of systemic risks in the financial system, and some of the challenges that still exist with respect to maximizing the use of data to identify and monitor systemic threats.

After reading this chapter you will be able to:

• List the key characteristics that data should possess to aid in the monitoring of systemic risks.
• Identify examples of economic data sources that can prove useful in the identification of systemic risk buildup.
• Explain the various systemic risk indices and ...