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The Effect of Prudential Supervision Requirements on Systemic Contagion in Iran's Banking Network: Application of agent-based approach and Adaptive Learning Algorithm
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Roghayeh Nazemfar   , Amir Mansour Tehranchian * , Mohammadreza Asghari Oskoei |
| Mazandaran University , m.tehranchian@umz.ac.ir |
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Abstract: (522 Views) |
| One of the key issues in financial stability studies and prudential policies is systemic liquidity risk, in other words, the risk of liquidity problems at the same time and in several financial institutions. The fact that in the complex network of interbank market interconnections, the lack of liquidity is provided by spreading it between financial institutions, can lead to "systemic contagion" in the banking network. This research aims to investigate the existence of systemic contagion in the banking network of Iran and the effect of the Basel Committee's prudential regulations on interbank contagion based on the balance sheet data of 25 banks that are members of the interbank market in the years 2006-2018. For this purpose, based on the agent-based approach, Iran's banking network has been modeled and simulated. In this model, banks and the central bank are intelligent agents. Based on the obtained results, prudential regulatory requirements change banks' adaptive strategies, and banks put increasing the capital adequacy ratio on their agenda. In addition, this research shows that although the guidelines of the Basel Committee have succeeded in reducing contagion in the long run and making the banking network more stable, banks also reduce the supply of loans to the real sector, which can lead to a crunch in the economy. |
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| Keywords: Agent-based model, Banking network, Systemic contagion |
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Full-Text [PDF 1285 kb]
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Type of Study: Research |
Subject:
Special
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