Systemic risk concerns the possibility that the functioning of the financial system can be threatened or materially impaired as a result of the collective behaviour of market participants, investors and financial institutions; it derives, in particular, from their interactions in financial markets and from the close links between the supply of credit and the macro-economy.
Systemic risks can emerge even when financial institutions manage their risks in a way that looks appropriate from their individual perspective. Given the interconnectedness in highly developed financial systems, the behaviour of financial institutions – especially systemically important ones – can have an impact on other financial institutions and the financial system as a whole.