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Systemic surcharges and measures of systemic importance

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  • Sigbjørn Atle Berg
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    Abstract

    Purpose – There is an emerging consensus that systemically important banks should face stricter regulations and systemic surcharges. To make this latter principle operational the regulator will need to quantify the systemic importance of individual banks. The purpose of this paper is to review the proposed measures of systemic importance from the research community and discuss their merits relative to how a regulator would ideally wish to calibrate surcharges on systemically important banks, and to evaluate how useful proposed measures of the systemic importance of financial institutions will be to regulators. Design/methodology/approach – The author reviews the main contributions to the research literature and discusses their relevance for the problem faced by regulators. Findings – There are five main caveats that make the proposed measures of systemic importance less useful for regulators. Practical implications – The proposed measures may help identify relevant aspects of systemic importance, but the regulators will need to construct their own measures for practical use. Originality/value – The paper provides a critical review of a research literature that could potentially have large practical implications.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Financial Regulation and Compliance.

    Volume (Year): 19 (2011)
    Issue (Month): 4 (November)
    Pages: 383-395

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    Handle: RePEc:eme:jfrcpp:v:19:y:2011:i:4:p:383-395

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    Related research

    Keywords: Banks; Financial regulation; Systemic institutions;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Acharya, Viral V., 2009. "A Theory of Systemic Risk and Design of Prudential Bank Regulation," CEPR Discussion Papers 7164, C.E.P.R. Discussion Papers.
    2. Celine Gauthier & Alfred Lehar & Moez Souissi, 2010. "Macroprudential Regulation and Systemic Capital Requirements," Working Papers 10-4, Bank of Canada.
    3. Nikola Tarashev & Mathias Drehmann, 2011. "Measuring the systemic importance of interconnected banks," BIS Working Papers 342, Bank for International Settlements.
    4. Xin Huang & Hao Zhou & Haibin Zhu, 2009. "Assessing the systemic risk of a heterogeneous portfolio of banks during the recent financial crisis," Finance and Economics Discussion Series 2009-44, Board of Governors of the Federal Reserve System (U.S.).
    5. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Risk Assessment for Banking Systems," Management Science, INFORMS, vol. 52(9), pages 1301-1314, September.
    6. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
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    Citations

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    Cited by:
    1. Michal Skorepa & Jakub Seidler, 2014. "Capital Buffers Based on Banks' Domestic Systemic Importance: Selected Issues," Research and Policy Notes 2014/01, Czech National Bank, Research Department.
    2. Zlatuse Komarkova & Vaclav Hausenblas & Jan Frait, 2012. "How To Identify Systemically Important Financial Institutions," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2011/2012, chapter 0, pages 100-111 Czech National Bank, Research Department.

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