The Global Risks Alliance (GRA)
Risk reaches banks from the real economy and leaves them again into the economy and the financial system. A drought, a cyber incident or a housing downturn can move through borrowers, collateral, funding and operations into bank losses, and from there into tighter credit, lower spending and stress at other institutions. This page shows how real-system and financial vulnerabilities propagate, as studied on Banking Nexus by The Global Risks Alliance (GRA).
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For financial-system transmission, in GRA's spatial-finance reading, the map opens on night lights and population density with built-up and settlement extent from NASA GIBS, framed on World; every other NASA layer, live feed and forecast waits in the layer list.Satellite and model products as NASA publishes them, each with its own date; indicators, not assessments of any place; claim ceiling INTEGRATED.
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GeographyFor financial-system transmission, in GRA's spatial-finance reading, the map opens on night lights and population density with built-up and settlement extent from NASA GIBS, framed on World; every other NASA layer, live feed and forecast waits in the layer list.
Risk transmission in Banking Nexus is the path by which physical, transition, technology and systemic shocks reach the sector and travel onward through balance sheets, markets and the real economy. Analysis uses aggregated, sector-level indicators such as non-performing loan ratio and stage 2 and stage 3 loan share; it assesses no individual firm and is not investment advice.
Fig.How GCRI, GRF and GRA share one field while the authorities decide. Design, not a record.
The working screen behind this subject: its structure, terms and states. Names are placeholders and values illustrative.
| Channel | Mechanism | Example |
|---|---|---|
| Borrower income | Shocks cut the cash flow that services loans | Crop failure reduces farm loan repayments |
| Collateral value | Hazards or price falls impair assets securing loans | Flood damage lowers property values in a mortgage book |
| Sector concentration | Exposures cluster in one region or industry | A regional bank lending mainly to one exposed economy |
| Funding | Depositors or markets withdraw on loss of confidence | Rapid digital deposit outflows |
| Operations | Outages at the bank or a shared provider | A cloud failure interrupts payments at several banks |
Channels describe mechanisms, not measured strengths or probabilities.
After a large disaster, three balance sheets interact. Uninsured collateral losses raise loan losses; insurers facing claims may sell assets or withdraw cover; the sovereign spends on reconstruction and may face higher borrowing costs, which lowers the value of the government bonds banks hold. The loop is strongest where banks hold much domestic sovereign debt and insurance penetration is low. Sovereign effects continue at Public Finance and Sovereign Debt; insurance effects at Insurance Nexus risk transmission.
Regional disasters also move liquidity: depositors draw cash, firms draw credit lines and payment systems may be disrupted. The BCBS liquidity standards assume stressed outflows but not regional physical disruption to branches, ATMs and power. Operational dependence continues at payment dependencies; infrastructure evidence at GCRI grid disruption and recovery.
Leverage magnifies losses relative to capital. When capital falls, banks cut lending to protect their ratios, which hurts borrowers and can create further losses, a feedback loop between banks and the real economy. Selling assets to raise liquidity can depress prices and impose losses on other holders.
Interconnection spreads stress. Interbank exposures, common holdings of similar assets and shared dependence on payment systems and technology providers mean that one institution's problem can become many institutions' problem. Uncertainty about who is exposed can freeze funding markets even for sound banks.
Households and small firms lose access to credit just when they need it to recover.
Outages stop wages, purchases and supplier payments.
Support for banks and lost tax revenue strain public budgets, which can feed back to banks holding government debt.
Analysis uses network science and contagion, probability and statistics and scenario methods, with aggregated sector data. It does not assess individual firms, recommend transactions or constitute investment advice. Methods and uncertainty are set out on analysis and uncertainty. The system-wide view is developed on Financial Stability transmission, and the hazard evidence comes from The Global Centre for Risk and Innovation (GCRI), for example compound hazards.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Transmission channel | The route by which a shock reaches financial institutions' balance sheets. |
| Contagion | Transmission of losses or stress from one institution or market to others. |
| Second-round effects | Feedback from bank losses to the economy, such as tighter credit deepening a downturn. |
| Common exposure | Holdings of the same or similar assets by several institutions, which makes their losses move together. |
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.