Would a systemic risk tax protect SA from a potential banking failure?
Qobolwakhe Dube and Co-Pierre Georg provide new insights into the extent of risk the country’s financial system faces
Systemic risk can lead to the collapse of financial markets as happened in the 2008-09 global financial crisis. In a new study, Qobolwakhe Dube and Co-Pierre Georg provide new insights into the extent of risk the country’s financial system faces. I quizzed them about their findings. Q: What is systemic risk? A: It’s the risk of a collapse of the entire financial system, rather than the failure of individual parts. The word systemic refers to the fact that all the various players in the financial markets are interconnected and have common exposures. Systemic risk is when the failure of one financial institution leads to severe instability or even collapse of the entire financial system. An example is the collapse of the US investment bank Lehman Brothers. Lehman was declared insolvent in 2008 following the US government’s refusal to bail it out and after it stumbled over investments in dodgy mortgages. Its collapse had a domino effect — first on banks in the US and then across the wo...
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