Sheheryar Malik's Books

Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability

By: Selim Elekdag,Sheheryar Malik,Ms.Srobona Mitra

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Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability

By: Selim Elekdag,Sheheryar Malik,Ms.Srobona Mitra

This paper explores the determinants of profitability across large euro area banks using a novel approach based on conditional profitability distributions. Real GDP growth and the NPL ratio are shown to be the most reliable determinants of bank profitability. However, the estimated conditional distributions reveal that, while higher growth would raise profits on average, a large swath of banks would most likely continue to struggle even amid a strong economic recovery. Therefore, for some banks, a determined reduction in NPLs combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability.

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International Monetary Fund

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ISBN 10

1513522256

ISBN 13

9781513522258

What Is Driving the Rise in Advanced Economy Bond Yields?

By: Rohit Goel,Sheheryar Malik

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What Is Driving the Rise in Advanced Economy Bond Yields?

By: Rohit Goel,Sheheryar Malik

The nominal bond yields for advanced economies rose sharply during the first quarter of the year. This note analyzes the drivers of this increase across the jurisdictions and tenors of the yield curve. A key investor focus, in particular, has been the rise in the nominal bond yields in the United States, which has had notable global financial stability spillovers. The analysis indicates that the rise in inflation expectations is the primary driver of the rise in US nominal bond yields over the near term, whereas, the rise in real yields has been the major contributor to the rise in longer-term yields. The change in term premiums has also played a key role in driving both the longer-term inflation breakeven and real yields. Considering other major advanced economies, while inflation expectations have risen across the board in the near term, change in real yields appear more pertinent a driver for shifts in longer-term yields.

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International Monetary Fund

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ISBN 10

151358880X

ISBN 13

9781513588803

Interconnectedness of Global Systemically-Important Banks and Insurers

By: Sheheryar Malik,TengTeng Xu

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Interconnectedness of Global Systemically-Important Banks and Insurers

By: Sheheryar Malik,TengTeng Xu

Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—i.e., among all GSIBs and GSIIs—tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.

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International Monetary Fund

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ISBN 10

1484320719

ISBN 13

9781484320716

A Comprehensive Multi-Sector Tool for Analysis of Systemic Risk and Interconnectedness (SyRIN)

By: Fabio Cortes,Peter Lindner,Sheheryar Malik,Miguel A. Segoviano Basurto

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A Comprehensive Multi-Sector Tool for Analysis of Systemic Risk and Interconnectedness (SyRIN)

By: Fabio Cortes,Peter Lindner,Sheheryar Malik,Miguel A. Segoviano Basurto

This paper presents the Systemic Risk and Interconnectedness (SyRIN) tool. SyRIN allows a comprehensive assessment of systemic risk via quantification of the impact of risk amplification mechanisms, due to interconnectedness structures across banks and other financial intermediaries—insurance, pension fund, hedge fund and investment fund sectors, which cannot be captured when analyzing sectors independently. The tool produces various metrics to evaluate systemic risk from complementary perspectives, including tail risk, cross-entity interconnectedness and the contribution to systemic risk by different entities and sectors. SyRIN is easily implementable with publicly available data and can be adapted to cater to different degrees of institutional granularity and data availability. The framework is designed to be a tool to identify vulnerabilities from a top-down perspective that can lead to deeper analysis in specific sectors for policy formulation.

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International Monetary Fund

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ISBN 10

1484338995

ISBN 13

9781484338995

Assessing Loss of Market Access: Conceptual and Operational Issues

By: Ms.Anastasia Guscina,Sheheryar Malik,Mr.Michael G. Papaioannou

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Assessing Loss of Market Access: Conceptual and Operational Issues

By: Ms.Anastasia Guscina,Sheheryar Malik,Mr.Michael G. Papaioannou

Loss of market access (LMA) is a central element and an exacerbator of balance of payments and fiscal crises. This paper provides an operational definition of LMA, examines the predictive power of potential LMA leading indicators, attempts to determine the likely nature (temporary versus structural) of an LMA episode, and analyzes potential implications of such an assessment on the required degree of adjustment to restore market access. Finally, it highlights the possible application of the methodological framework for identifying emerging risks to market access.

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International Monetary Fund

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ISBN 10

1484329228

ISBN 13

9781484329221

On Swing Pricing and Systemic Risk Mitigation

By: Sheheryar Malik,Peter Lindner

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On Swing Pricing and Systemic Risk Mitigation

By: Sheheryar Malik,Peter Lindner

Swing pricing allows a fund manager to transfer to redeeming or subscribing investors the costs associated with their trading activity, thus potentially discouraging large flows. This liquidity management tool, which is already used in major jurisdictions, may also help mitigate systemic risk. Here we develop and apply a methodology to investigate whether swing pricing does in fact help dampen flows out of funds, especially during periods of market stress. Drawing on evidence of first-mover advantage within a group of ‘swinging’ corporate bond funds, we provide policy considerations for enhancing the tool’s effectiveness as a systemic risk mitigant.

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International Monetary Fund

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ISBN 10

1484310152

ISBN 13

9781484310151

The Term Structure of Growth-at-Risk

By: Tobias Adrian,Federico Grinberg,Nellie Liang,Sheheryar Malik

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The Term Structure of Growth-at-Risk

By: Tobias Adrian,Federico Grinberg,Nellie Liang,Sheheryar Malik

Using panel quantile regressions for 11 advanced and 10 emerging market economies, we show that the conditional distribution of GDP growth depends on financial conditions, with growth-at-risk (GaR)—defined as growth at the lower 5th percentile—more responsive than the median or upper percentiles. In addition, the term structure of GaR features an intertemporal tradeoff: GaR is higher in the short run; but lower in the medium run when initial financial conditions are loose relative to typical levels, and the tradeoff is amplified by a credit boom. This shift in the growth distribution generally is not incorporated when solving dynamic stochastic general equilibrium models with macrofinancial linkages, which suggests downside risks to GDP growth are systematically underestimated.

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