The impact of contagion on interbank markets
The Bank for International Settlements has published a paper on using counterfactual simulations to assess the danger of contagion in interbank markets.
The simulations suggest contagious defaults are unlikely, but cannot be fully ruled out. If contagion does take place, then the simulations find it could lead to the breakdown of a substantial fraction of the banking system, the paper argues.
To read the paper, click here
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