Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298571 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
CBM Working Papers No. WP/01/2024
Publisher: 
Central Bank of Malta, Valletta
Abstract: 
Cyclical systemic risk arises when macro-financial imbalances accumulate over time. Past financial crises which occurred in several countries around the world have shown that heightened cyclical risk can lead to exorbitant economic and financial costs if the appropriate macroprudential policies are not enacted at the correct time. Although many indicators are monitored in the conduct of macroprudential oversight and analysis, there is to date no in-house country-specific composite indicator for cyclical risk for Malta developed by the Central Bank of Malta. This paper addresses this gap by building a cyclical systemic risk indicator (cSRI). The cSRI is driven by the 2-year growth rate in real bank credit, the 1-year change in the debt service to income ratio, the house price to income ratio and the 2-year growth rate in real total debt. These sub-indicators are believed to have early warning characteristics on financial distress. This indicator forms part of a cyclical risk analysis framework of the Central Bank of Malta, complementing other tools that support the formulation of macroprudential policy recommendations.
Subjects: 
Cyclical systemic risk
Real bank credit
House price to income
Debt service to income
Real total debt
JEL: 
G21
G23
G51
Document Type: 
Working Paper

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