Staff Working Paper No. 983
By Giovanni Covi, James Brookes and Charumathi Raja
In this paper we construct and analyse the UK banking system’s Global Network of granular exposures which captures roughly 90% of the UK banking system’s total assets for the period 2018 Q1 to 2021 Q4. We thus study the microstructure of UK banking system focusing on the role played by concentration risk and interconnectedness across sectors. We then estimate the quarterly evolution of expected losses (Capital at Risk) for the UK banking sector, and via Monte Carlo simulations the stochastic distribution of UK banks’ losses to study the severity and likelihood of tail-events (Conditional Capital at Risk). In the end, we provide insights on the impact of the Covid-19 pandemic on UK banking system’s loss distribution by decomposing the sources of average and tail risks.
Measuring Capital at Risk in the UK banking sector: a microstructural network approach
UK Banks' and UK Insurers' Exposures by Asset Class and NACE Code in Q4-2021
