The subject of the Systemic Risk Lab is the cross-area examination of causes and effects of systemic risks as well as of measures for their limitation. Recent developments on the financial markets suggest that fundamental assumptions of our traditional financial markets theory are incomplete if not grossly flawed. It is obviously problematic to equate information-efficient markets with welfare optimizing markets, especially in the markets where banks borrow capital.

A special feature of financial markets compared to goods markets is the strong intertwining of claims within the banking sector. This is why the architecture of financial markets has not only become considerably more complex during the last 15 years, but also more susceptible to extreme events.

In this new, complex and heavily intertwined world, systemic risks are becoming a lasting threat to financial markets, to economic prosperity and, in the end, also to political stability. In acute crisis situations, political decision makers are forced to immediately find answers and, at the same time, comply with the conditions of a sustainable stabilization of the system – a task that is in a lot of cases unsolvable.

Against this background and by taking advantage of all disciplines gathered in SAFE, the Systemic Risk Lab investigates its subject systematically with innovative methods in order to advance existing knowledge and to develop specific regulatory recommendations.