Non-core Liabilities as an Indicator of Systemic Risk and a Liquidity Stress Test Application on Turkish Banking System

Non-core Liabilities as an Indicator of Systemic Risk and a Liquidity Stress Test Application on Turkish Banking System

Title:

Non-core Liabilities as an Indicator of Systemic Risk and a Liquidity Stress Test Application on Turkish Banking System

Number:

14/12

Author(s):

Kurmaş Akdoğan,Burcu Deniz Yıldırım

Language:

English

Date:

April 2014

Abstract:

We provide a detailed classification of core and non-core liabilities for the Turkish banking system à la Shin and Shin (2010). We further carry out a two-stage liquidity stress test similar to Van Den End (2010) where we simulate inflow and outflow factors as well as the network topology of mutual liabilities between financial institutions. Our results indicate that Turkish banking system with relatively low level of non-core liabilities is to a great extent robust to liquidity shocks. Nevertheless, the level of non-core liabilities should be monitored closely considering its pro-cyclical behaviour over the business cycle and its strong correlation with credit growth..

Keywords:

Financial stability, Non-core liabilities, Liquidity stress test, Network topology

JEL Codes:

C15; E44; G21; G28; G32

Non-core Liabilities as an Indicator of Systemic Risk and a Liquidity Stress Test Application on Turkish Banking System
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