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Systemic risk and other interdependencies among banks in Bolivia

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  • Caceres-Santos, Jonnathan
  • Rodriguez-Martinez, Anahi
  • Caccioli, Fabio
  • Martinez-Jaramillo, Serafin
Abstract
We performed a study of the Bolivian high-value payment system between 2015 and 2020 and of the network of interbank exposures between 2018 and 2020. We characterize the network structure of these systems and perform a systemic risk analysis. We find that the connectivity of the payment network has increased over time, and that it displays a core-periphery structure. Using the SinkRank algorithm, we identify two institutions as the most important throughout the period of study. However, by exploring daily, monthly and yearly networks, we find that, in general, the ranking depends on the level of temporal aggregation. Concerning interbank exposures, we carry out a systemic risk analysis using the DebtRank algorithm. In this analysis, we adjust the banks’ Tier 1 capital to account for credit risk from the commercial loans portfolios, based on the estimation of unexpected losses. We find that average DebtRank and vulnerability of banks tend to increase over time. We link this to a corresponding trend in the size of exposures. We observe spikes in DebtRank and vulnerability, which also occur in correspondence with spikes observed in the size of exposures.

Suggested Citation

  • Caceres-Santos, Jonnathan & Rodriguez-Martinez, Anahi & Caccioli, Fabio & Martinez-Jaramillo, Serafin, 2020. "Systemic risk and other interdependencies among banks in Bolivia," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    • Handle: RePEc:eee:lajcba:v:1:y:2020:i:1:s2666143820300156
    DOI: 10.1016/j.latcb.2020.100015
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    References listed on IDEAS

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    6. Cuba, Walter & Rodriguez-Martinez, Anahi & Chavez, Diego A. & Caccioli, Fabio & Martinez-Jaramillo, Serafin, 2021. "A network characterization of the interbank exposures in Peru," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(3).

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