Exploring non-traditional shocks and contagion risk in the U.S banking system: A discussion and forward looking perspective for Vietnam

Abstract

The banking industry’s stability is essential for a country’s well-being. The management of policy, the protection of public deposits, the management of national debt, and the coordination of commercial activity remain all areas in which it provides significant assistance. Conventional shocks have been shown to demonstrate the potential to cause banks to go bankrupt, which is a phenomenon that has been widely acknowledged and has long-term repercussions. The banking industry is the subject of this research, which explores the impact of unusual shocks such as climate change and illnesses. The outbreak of unconventional disturbances has significantly impacted both the financial system and the national economy. Service sectors and consumer confidence are currently around 50-60% and have not experienced a complete recovery. Failure to return the unemployment rate to its initial level leads people to save and deposit money, resulting in many economies entering a recession. To begin, I use of frameworks that take into account a variety of factors that influence financial risk, in addition to the data and literature that is already available on sudden and unexpected shocks. Through the utilization of analysis and risk models, My study is capable of evaluating the impact that unanticipated shocks deliver on financial institutions, as well as the methods by which they can anticipate and handle these shocks. This study sheds information on the susceptibility of financial institutions to the aforementioned sorts of shocks. Places an emphasis on the dangers that are linked with insolvency. Not exclusively does the failure of a particular financial institution provide a threat, but the interconnection of banking networks can cause the effect of amplifying systemic risks, which might ultimately result in widespread financial catastrophes. It is essential to retain this in mind. In order to facilitate policymakers' thorough consideration of the growing complexity of the situation, ideas are developed in order to enhance the comprehension of disruptions