CBID Joint Finance Seminar: Giovanni Covi - Bank of England

In this paper we construct and analyse the UK banking system’s Global Network of granular  exposures which captures roughly 90% of the UK banking system’s total assets for the period  Q1-2018 to Q4-2021. We thus study the microstructure of UK banking system focusing on the  role played by concentration risk and interconnectedness across sectors. We then estimate the  quarterly evolution of expected losses (Capital at Risk) for the UK banking sector, and via Monte Carlo simulations the stochastic distribution of UK banks’ losses to study the severity  and likelihood of tail-events (Conditional Capital at Risk). In the end, we provide insights on  the impact of the Covid-19 crisis on UK banking system’s loss distribution by decomposing the sources of average and tail risks