SYSTEMIC RISK IMPORTANCE FOR FINANCIAL SYSTEM FUNCTIONINGDanijel Mlinarić, Marko Nevešćanin |
Published 11/20/2020 |
ABSTRACT
Before the global financial crisis in 2008./2009. systemic risks were not in the focus of scientists and practitioners. After the mentioned disruption in global financial markets, significant turnover has happened. The goal of systemic risk investigation is to detect and prevent a possible financial crisis and to mitigate its effects when it comes to it. The financial system of the past years has experienced the processes of globalization, financial liberalization and integration, and everfaster technological progress. It is financial liberalization that has become one of the sources of systemic risk, integration has increased its reach, and technological development and new financial products are expanding it. System risk has many perspectives and a lot of angles. All definitions have a common view of systemic risks as a series of adverse events that can cause instability in the financial system. Systemically important financial institutions have the greatest influence on the spread of systemic risks since difficulties in their operations can be “spilled over” to other institutions, and thus to the entire economy. We can measure systemic risks using indicators and models. This paper presents an analysis of the models and indicators of the systemic crisis with the evaluation of the financial systems of the United States of America and the European Union. Special remarks have given on their regulatory frameworks. We also evaluate the possibility of materialization of systemic risk in the Republic of Croatia.
Keywords: systemic risk, financial system, systemic risk indicators, regulatory framework.