Interbank exposures: quantifying the risk of contagion

BIS Working Papers  |  No 70  | 
02 June 1999
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This paper examines the likelihood that failure of one bank would cause the subsequent collapse of a large number of other banks. Using unique data on interbank payment flows, the magnitude of bilateral federal funds exposures is quantified. These exposures are used to simulate the impact of various failure scenarios, and the risk of contagion is found to be economically small.