A liquidity risk index as a regulatory tool for systemically important banks? An empirical assessment across two financial crises
AbstractWe provide an assessment of the IMF suggestion, based on Severo (2012), to use an index of systemic liquidity risk (SLRI) that could help to estimate a Pigouvian tax on large banks for the externality on the international banking system out of their risk exposure. To this end we compute a parsimonious and fully documented SLRI and investigate its statistical significance in explaining level and variability of stock returns for a group of large international banks during the subprime financial and the Eurozone sovereign debt crises. The empirical investigation consistently fails to detect, within and across the two crises, a core group among the systemically important banks listed by the Financial Stability Board and thus supports a sceptical assessment of the proposal.
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Bibliographic InfoPaper provided by Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi" in its series Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) with number 13071.
Length: pages 26
Date of creation: Jul 2013
Date of revision:
subprime crisis; Eurozone sovereign crisis; systemic risk; banks’ stock returns; macroprudential regulation;
Find related papers by JEL classification:
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-BAN-2013-07-28 (Banking)
- NEP-CBA-2013-07-28 (Central Banking)
- NEP-RMG-2013-07-28 (Risk Management)
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