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Domestic Systemically Important Banks: An Indicator-Based Measurement Approach for the Australian Banking System

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Author Info

  • Patrick Brämer

    ()
    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Horst Gischer

    ()
    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

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    Abstract

    This paper serves as a response to the assessment methodology of the Basel Committee on Banking Supervision to identify systemically important banks. Based on the official technique, which requires an extensive collection of bank data, our paper develops a practicable modification. Utilising readily available indicators, we determine the domestic systemic risk of each licensed bank in Australia in the period 2002-2011. Our quantitative results uncover not only high levels of systemic risk for the four major banks, but their rising dominance during the global financial crisis. Consequently, we introduce a regulatory proposal that enables authorities to reduce the systemic risk of individual institutions.

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    File URL: http://www.fww.ovgu.de/fww_media/femm/femm_2012/2012_03.pdf
    File Function: First version, 2012
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    Bibliographic Info

    Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 120003.

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    Length: 24 pages
    Date of creation: Jan 2012
    Date of revision:
    Handle: RePEc:mag:wpaper:120003

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    Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg
    Phone: (0391) 67-18 584
    Fax: (0391) 67-12 120
    Web page: http://www.ww.uni-magdeburg.de
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    Related research

    Keywords: Basel III; financial regulation; indicator-based measurement; systemic risk;

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    References

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    1. Viral Acharya & Tanju Yorulmazer, 2007. "Too many to fail - an analysis of time-inconsistency in bank closure policies," Bank of England working papers 319, Bank of England.
    2. Robert A. Eisenbeis, 2009. "What We Have Learned and Not Learned from the Current Crisis about Financial Reform," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 457-469.
    3. Nicola Cetorelli, 2001. "Competition among banks: good or bad?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 38-48.
    4. Goodhart, Charles A.E. & Huang, Haizhou, 2005. "The lender of last resort," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1059-1082, May.
    5. Martin Cihák & Simon Wolfe & Klaus Schaeck, 2006. "Are More Competitive Banking Systems More Stable?," IMF Working Papers 06/143, International Monetary Fund.
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