Description:
Recent failures of US banks highlight that large liability withdrawals can damage capital positions-i.e., that liquidity risk and solvency risk interact. A simple risk assessment for banks in a wide group of countries finds sizable exposure to this interaction. This varies significantly across banks-primarily reflecting differences in cash buffers, capitalization, securities holdings and exposure to market risk-and is highly concentrated. Vulnerability is generally greater for banks in AEs due to lower cash buffers, securities holdings and capitalization. Within AEs-unlike in EMs-larger banks are most exposed, due to greater wholesale funding and thinner capital buffers. Estimated aggregate losses are substantial in some countries, reflecting a range of recent shocks