Seminario Consuelo Silva:”The two faces of bank correlation”

Consuelo Silva, Profesor Asistente de la Facultad de Economía y Negocios de la Universidad Alberto Hurtado, realizó un Workshop el pasado 30 de Septiembre de 2015, en las dependencias del Departamento de Administración, Facultad de Economía y Negocios, Universidad de Chile.  A este seminario asistieron académicos del Departamento de Administración, FEN UChile, y otros académicos invitados pertenecientes a otras universidades. 

Consuelo, presentó una de sus últimas investigaciones, la cual se titula “The two faces of bank correlation”. A continuación se presentan las principales ideas de este seminario: We show that interbank correlations, a common input into systemic risk measures, consist of two parts: a pure systemic risk component and a component arising from diversification activities. We introduce an approach to decompose the two parts and find the diversification component to be dominant at U.S. Bank Holding Companies. Furthermore, we show that existing systemic risk measures can be improved by applying the decomposition, as only the pure systemic risk component predicts bank weakness during the crisis of 2007-2009. The decomposition also offers a new, market-based, measure of diversification. The implied gains from diversification turn out to be rapidly declining with bank size. Since large banks additionally display high levels of the systemic risk component, they are predominantly exposed to the undesirable part of interbank correlation”.