Identifying systemically important financial institutions: size and other determinants
AbstractThis paper analyzes the conditions under which a financial institution is systemically important. Measuring the level of systemic importance of financial institutions, we find that size is a leading determinant confirming the usual “Too Big To Fail” argument. Nevertheless, the relation is non-linear during the recent global financial crisis. Moreover, since 2003, other determinants of systemic importance emerge. For example, decisions made by financial institutions on their choice of asset holdings, methods of funding, and sources of income have had a significant effect on the level of systemic importance during the global financial crises starting in 2008. These findings help to identify systemically important financial institutions by examining their relevant banking activities and to further design macro-prudential regulation towards reducing the systemic risk in the financial system.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 347.
Date of creation: Jul 2012
Date of revision:
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-BAN-2012-07-23 (Banking)
- NEP-CBA-2012-07-23 (Central Banking)
- NEP-RMG-2012-07-23 (Risk Management)
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.:
- 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.
- Acharya, Viral V., 2009. "A theory of systemic risk and design of prudential bank regulation," Journal of Financial Stability, Elsevier, vol. 5(3), pages 224-255, September.
- O. De Jonghe, 2009.
"Back to the Basics in Banking? A Micro-Analysis of Banking System Stability,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
09/579, Ghent University, Faculty of Economics and Business Administration.
- De Jonghe, Olivier, 2010. "Back to the basics in banking? A micro-analysis of banking system stability," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 387-417, July.
- Olivier De Jonghe, 2009. "Back to the basics in banking ? A micro-analysis of banking system stability," Working Paper Research 167, National Bank of Belgium.
- De Vries, C.G., 2005.
"The simple economics of bank fragility,"
Journal of Banking & Finance,
Elsevier, vol. 29(4), pages 803-825, April.
- Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734, June.
- Dennis Jansen & Casper de Vries, 1988.
"On the frequency of large stock returns: putting booms and busts into perspective,"
1989-006, Federal Reserve Bank of St. Louis.
- Jansen, Dennis W & de Vries, Casper G, 1991. "On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 18-24, February.
- Acharya, Viral V. & Gale, Douglas M & Yorulmazer, Tanju, 2009.
"Rollover Risk and Market Freezes,"
CEPR Discussion Papers
7122, C.E.P.R. Discussion Papers.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007.
"Market Liquidity and Funding Liquidity,"
FMG Discussion Papers
dp580, Financial Markets Group.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
- De Bandt, Olivier & Hartmann, Philipp, 2000.
"Systemic risk: A survey,"
Working Paper Series
0035, European Central Bank.
- Tobias Adrian & Hyun Song Shin, 2008.
"Liquidity and leverage,"
328, Federal Reserve Bank of New York.
- Behr, Andreas & Kamp, Andreas & Memmel, Christoph & Pfingsten, Andreas, 2007. "Diversification and the banks' risk-return-characteristics: evidence from loan portfolios of German banks," Discussion Paper Series 2: Banking and Financial Studies 2007,05, Deutsche Bundesbank, Research Centre.
- Jean-Charles Rochet & Jean Tirole, 1996.
"Interbank lending and systemic risk,"
Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
- Charles Goodhart & Miguel Segoviano, 2009. "Banking Stability Measures," FMG Discussion Papers dp627, Financial Markets Group.
- Chen Zhou, 2009. "Are banks too big to fail?," DNB Working Papers 232, Netherlands Central Bank, Research Department.
- John Krainer & Jose A. Lopez, 2003. "How might financial market information be used for supervisory purposes?," Economic Review, Federal Reserve Bank of San Francisco, pages 29-45.
- Mardi Dungey & Matteo Luciani & David Veredas, 2012.
"Ranking Systemically Important Financial Institutions,"
Tinbergen Institute Discussion Papers
12-115/IV/DSF44, Tinbergen Institute.
- Mardi Dungey & Mattéo Luciani & David Veredas, 2012. "Ranking Systemically Important Financial Institutions," Working Papers ECARES 2013/130530, ULB -- Universite Libre de Bruxelles.
- Dungey, Mardi & Luciani, Matteo & Veredas, David, 2012. "Ranking systemically important financial institutions," Working Papers 15473, University of Tasmania, School of Economics and Finance, revised 21 Nov 2012.
- Mardi Dungey & Matteo Luciani & David Veredas, 2012. "Ranking Systemically Important Financial Institutions," CAMA Working Papers 2012-47, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.