Knowra Systemic risk Systemic risk Systemic risk is the possibility that disruption in one part of a financial system will spread or interact with other disruptions, impairing the system as a whole.
Financial contagion : The spread of financial distress from one institution, market, or country to others. It describes the transmission of distress that makes an initial shock systemic.
Global financial crisis : The worldwide financial crisis that began in 2007 and intensified in 2008, causing severe economic disruption. It exposed how mortgage losses, leverage, and funding stress could reinforce one another.
Financial system : The institutions, markets, infrastructure, and rules that enable financial transactions and intermediation. Systemic risk concerns disruption to this connected whole, not just one firm.
Macroprudential regulation : Financial regulation aimed at limiting risks to the stability of the financial system as a whole. It targets system-wide vulnerabilities rather than only individual institutions.
Idiosyncratic risk : Risk specific to an individual company, asset, or event rather than shared across a market. It may remain contained when exposures are not widely connected or shared.
Interconnectedness : The pattern and strength of links among components of a system. Financial exposures connect institutions and can carry losses across the system.
Lehman Brothers : An American investment bank that filed for bankruptcy in September 2008. Its collapse disrupted markets and intensified fears about connected counterparties.
Leverage (finance) : The use of borrowed funds to increase the size of an investment or position. High leverage makes losses more damaging and can force simultaneous asset sales.
Systemically important financial institution : A financial institution whose distress or failure could significantly disrupt the financial system or economy. Identifying these firms helps regulators focus oversight on potential sources of systemic disruption.
Systematic risk : Market-wide risk that affects many assets and cannot be eliminated through diversification. It describes broad exposure to common market movements, not necessarily financial-system failure.
Show all 26