Systemic Risk
Also called: systemic, contagion risk, too big to fail
Systemic risk is the danger that one institution's failure cascades into the collapse of the wider financial system, through direct exposures, fire sales and lost confidence. It's distinct from systematic risk, which merely means undiversifiable market risk. The policy response since 2008 — capital surcharges for globally important banks, central clearing, resolution planning — is aimed squarely at making individual failure survivable for everyone else.
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