systeemiriski

Systemic risk, or systeemiriski in Finnish, is the risk that the failure or distress of a single institution, market, or infrastructure component could trigger a widespread disruption to the entire financial system and real economy. It arises from interdependencies among financial institutions, markets, and payment and settlement systems, as well as from common exposures and interconnected risk factors.

Key sources and transmission channels include interbank and counterparty linkages, funding liquidity pressures, correlated asset holdings, and procyclical behavior that amplifies losses during stress. When one part of the system falters, fire sales, liquidity shortages, and capital withdrawals can spread to others, potentially leading to a broad loss of confidence, reduced credit supply, and a downturn in economic activity. Complex financial instruments, opacity, and strong leverage can magnify these effects.

Systemic risk is distinct from idiosyncratic risk, which affects only individual entities. It tends to rise during periods of financial stress when correlations increase and risk becomes more synchronized across institutions and markets. Measurements often use macroprudential indicators, network analyses of interconnected exposures, and risk metrics such as conditional value-at-risk (CoVaR) or system-wide risk gauges (SRISK).

Policy responses aim to reduce both the likelihood and the impact of systemic events. Macroprudential tools—such as higher capital and liquidity requirements, stress testing, and buffers to dampen procyclicality—are combined with resolution regimes, orderly unwinding plans, and measures to improve market infrastructure and transparency. Strong supervision and crisis prevention efforts seek to enhance resilience and reduce the risk of a system-wide financial disruption.