Järjestelmäriski

Järjestelmäriski refers to the risk of collapse of an entire financial system or market, as opposed to the risk associated with any one individual entity, group or component of a system. It is also known as systemic risk, cascading failure, or domino effect. This type of risk arises from the interactions and interdependencies within a complex system, such as the financial sector. When one institution or market experiences significant distress, it can trigger a chain reaction, leading to widespread failures.

The origins of systemic risk can be traced back to the interconnectedness of financial institutions through various channels, including interbank lending, derivatives contracts, and shared exposures to assets. A shock in one part of the system can propagate through these connections, affecting other entities and markets. For example, the failure of a large bank could lead to a loss of confidence in the entire banking sector, causing depositors to withdraw funds and credit markets to freeze up.

Factors contributing to systemic risk include excessive leverage, complex financial instruments, lack of transparency, and inadequate regulation. The 2008 global financial crisis is a prime example of systemic risk in action, where the collapse of the U.S. housing market and the subsequent failure of major financial institutions threatened the stability of the global financial system.

Mitigating systemic risk involves a range of measures, including macroprudential regulation, stress testing of financial institutions, resolution mechanisms for failing firms, and international cooperation. The goal is to build resilience into the financial system and prevent localized problems from escalating into widespread crises. Understanding and managing järjestelmäriski is crucial for maintaining financial stability.