GCRI · Fields across the Consortium
Financial stability
Financial stability concerns the resilience of the system as a whole: banks, insurers, funds and market infrastructure, and how shocks from outside finance (climate, cyber, pandemics) are amplified inside it.
01Contents
Financial stability in six parts.
02Three mandates
The field, seen three ways.
GCRI
Science and evidence
No platform yet in this field.
03Simulator
Contagion on an interbank network.
A loss on external assets distresses banks in proportion to their leverage; DebtRank passes the distress along interbank exposures, round by round, until it settles. Teaching model with stated illustrative values, not a prediction.
Controls
- Fall in external assets
- 2.0%
- Leverage (assets over equity)
- 10 times
- Interbank share of assets
- 10%
- Recovery on interbank claims
- 40%
- Banks in the system
- 20
- Core banks
- 20% of banks
Readouts
- Equity lost to the initial shock
- 18.0%
- Equity lost after contagion
- 45.0%
- Added by contagion (DebtRank)
- 27.0 points
- Banks in default
- 0
Numbers, methods and sources
| Round | System equity lost (%) | Banks in default |
|---|---|---|
| 0 | 18.00 | 0 |
| 1 | 28.80 | 0 |
| 2 | 35.28 | 0 |
| 3 | 39.17 | 0 |
| 4 | 41.50 | 0 |
| 5 | 42.90 | 0 |
| 6 | 43.74 | 0 |
| 7 | 44.24 | 0 |
| 8 | 44.55 | 0 |
| 9 | 44.73 | 0 |
| 10 | 44.84 | 0 |
| 11 | 44.90 | 0 |
| 12 | 44.94 | 0 |
| 13 | 44.96 | 0 |
| 14 | 44.98 | 0 |
| 15 | 44.99 | 0 |
| 16 | 44.99 | 0 |
| 17 | 45.00 | 0 |
| 18 | 45.00 | 0 |
| 19 | 45.00 | 0 |
| 20 | 45.00 | 0 |
| 21 | 45.00 | 0 |
| 22 | 45.00 | 0 |
| 23 | 45.00 | 0 |
| 24 | 45.00 | 0 |
| 25 | 45.00 | 0 |
| 26 | 45.00 | 0 |
| 27 | 45.00 | 0 |
| 28 | 45.00 | 0 |
| 29 | 45.00 | 0 |
| 30 | 45.00 | 0 |
Methods
- DebtRank Battiston and others (2012), Scientific Reports 2:541
- Differential DebtRank Bardoscia and others (2015), PLOS ONE 10
- Contagion in financial networks Gai and Kapadia (2010), Proc. R. Soc. A 466
- Clearing in financial networks Eisenberg and Noe (2001), Management Science 47
- Uncertainty fan (parameter Monte Carlo) Spiegelhalter, Pearson and Short (2011), Visualising uncertainty about the future, Science 333
- One-at-a-time sensitivity (tornado) Saltelli and others (2008), Global Sensitivity Analysis: The Primer, Wiley
Data
No observed data enters this model: it runs on the teaching values set by the controls, to be replaced with a programme’s own evidence.
Across the six pillars, led by Nexus Consortium
- Experiments Labs at GCRI: Labs
- Built in Foundry at GCRI: Foundry
- Tested at Universe at GCRI: Universe technical office
- Codified in Nexus Standards
- Published in Reports at GCRI: Publish
- Taught in Risk Academy
04The systemic question
Amplification channels.
Leverage, liquidity mismatch, interconnectedness and common exposures turn a loss into a crisis. Supervisors now run climate scenario analysis and operational resilience regimes alongside traditional stress tests. The science input that matters most is the physical-risk and cyber-scenario analysis feeding those exercises.
05Frameworks
Prudential references.
| Framework or body | What it governs or supplies |
|---|---|
| Basel Committee standards | Bank capital, liquidity and climate-related principles |
| Financial Stability Board | System-wide monitoring and policy coordination |
| CPMI-IOSCO PFMI and DORA | Market infrastructure risk and digital operational resilience |
06Couplings
From GCRI science to stability analysis.
Cyber accumulation scenarios on Cyber and Digital Resilience, hazard analysis on Climate and Hazards. GRA’s platforms listed below carry the sector analysis.
07Grounding
The methods behind the field.
- Financial economics and macro-finance
- Economics and development economics
- Policy, institutional and decision science
- Probability and statistics
- Network science and contagion
- Financial and risk engineering
- Artificial intelligence and machine learning
- Payment and financial market technology
- Econometrics
- Distributed ledgers and digital assets
- Data engineering, interoperability and stewardship
- Game theory and mechanism design
- Complex systems and agent-based modelling
- Scenario design and stress testing
- Reliability and resilience engineering
- Cybersecurity and cryptography
- Quantum computing, sensing and communication
- Software and safety-critical systems engineering
- AI evaluation and assurance engineering
- Uncertainty quantification and model validation
- Digital identity and public digital systems
08Sources
Where this page’s references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
09Questions
Questions and answers.
Why does GCRI host field gateways?
GCRI hosts the shared references of the Consortium, including the STEM Commons and the field gateways, so each field has one place that links all three institutions’ work.
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