Working paper
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This paper analyses the systemic risk in relation to bank lending for Asian economies.
The methodology complements existing market-based systemic risk measures by providing measures based on accounting information that regulators typically collect. Loan loss provisions of banks are decomposed into (i) a prediction component
that is based on observable bank characteristics, and (ii) two frailty components: a
bank-specic systematic factor based on the assumption that a bank's asset portfolio is diversied and a systemic factor. Systemic risk is measured as the Value-at-Risk and Expected Shortfall of the nancial system based on a simulation model that takes into account the current condition of banks in the nancial system, the absolute size and the capitalisation of nancial institutions, as well as the sensitivity to
systematic and systemic frailty risk.

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