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Too-big-to-fail Reforms and Systemic Risk

Author

Listed:
  • Kakuho Furukawa

    (Bank of Japan)

  • Hibiki Ichiue

    (Bank of Japan)

  • Yugo Kimura

    (Bank of Japan)

  • Noriyuki Shiraki

    (Bank of Japan)

Abstract

We examine the effects of too-big-to-fail reforms using ĢCoVaR and SRISK. Developments in these market-based systemic risk measures suggest that the reforms have led to a larger decline in the systemic risk contribution of global systemically important banks (G-SIBs) than of other banks. The systemic risk measures also suggest that the larger the systemic risk associated with a G-SIB, the more the reforms have led to a decline in its systemic risk. These findings are consistent with the objectives of the reforms and are validated by statistical analyses, including quantile panel regressions. We also highlight the importance of using data for a subset of financial institutions to adjust for the increase in data coverage when using popular estimates of SRISK. Furthermore, SRISK may overestimate systemic risk in recent years by ignoring the role of total loss absorbing capacity (TLAC)-eligible bonds.

Suggested Citation

  • Kakuho Furukawa & Hibiki Ichiue & Yugo Kimura & Noriyuki Shiraki, "undated". "Too-big-to-fail Reforms and Systemic Risk," Bank of Japan Working Paper Series 21-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp21e01
    as

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    References listed on IDEAS

    as
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    5. Christian Brownlees & Robert F. Engle, 2017. "SRISK: A Conditional Capital Shortfall Measure of Systemic Risk," The Review of Financial Studies, Society for Financial Studies, vol. 30(1), pages 48-79.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Too Big to Fail; Systemic Risk; Financial Regulations; CoVaR; SRISK;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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