Interbank Connections and Systemic Liquidity Risk in Peru

This paper presents a new indicator for identifying financial institutions that are systemically important to the liquidity of the financial system. The probability that an institution will cause liquidity problems for others is what we refer to as systemic liquidity risk. We propose an algorithm for funding contagion and an indicator that measures the likelihood of a problem arising that cannot be absorbed by the market. The results show that during the period from 2006 to 2018, systemic liquidity risk decreased in local currency, while, in foreign currency, no significant risk was observed at any time.