Risco Sistêmico no Mercado Bancário Brasileiro - Uma abordagem pelo método CoVar

The 2007-2009 global financial crisis has highlighted the need for a review of the practices of banking supervision. The trend of the post-crisis is a macro-prudential regulation in order to smooth out economic cycles and mitigate systemic risk. Accordingly, Adrian & Brunnermeier (2011) propose a measure of systemic risk - the CoVaR. Basically, the CoVaR of an institution represents the value at risk of the financial system conditional on the institution being under distress. They also define the institution's contribution to systemic risk as the difference between CoVaR conditional on the institution being under distress and the CoVaR in the median state of the institution. The aim of this paper is to evaluate the application of the CoVaR measure in the Brazilian banking system. The results for the Brazilian market indicate that: i) VaR is a poor measure to capture the systemic risk of an institution; ii) although larger institutions have less individual risks, they offer higher systemic risks; iii) some smaller institutions are also among the ones offering higher systemic risks; iv) on average, one unit of a larger institution individual risk increases more the systemic risk than one unit of a small institution individual risk; v) on average, the systemic risk is lower for public financial institutions. Furthermore, the findings (ii) and (iv) indicate that, on average, institutions with higher individual risk have minor marginal contributions to the systemic risk.