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Novel three-bank model for measuring the systemic importance of commercial banks

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  • Lu, Jing
  • Hu, Xiaohong

Abstract

Relaxing the hypothesis on the scale level of a bank, the present paper develops an improved three-bank model for analyzing the relationship between the size and the systemic importance of a bank. The proposed model is more general and more operational compared with other models. By introducing the L function based on the multivariate extreme theory and the systemically important index, the effect of the size on the systemic importance of a bank is analyzed. The size is found to be a necessary but insufficient condition for measuring the systemic importance of a bank. The size of a bank plays a critical role in evaluating systemic importance, but when the size reaches a certain threshold, its effect is weakened. The current study has theoretical and practical significance for the recognition and supervision of the systemic importance of banks.

Suggested Citation

  • Lu, Jing & Hu, Xiaohong, 2014. "Novel three-bank model for measuring the systemic importance of commercial banks," Economic Modelling, Elsevier, vol. 43(C), pages 238-246.
    • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:238-246
    DOI: 10.1016/j.econmod.2014.08.007
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    Cited by:

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    2. Michele Piffer, 2023. "Banks’ Leverage Evolution: The Case of Commercial Banks," Mathematics, MDPI, vol. 11(13), pages 1-16, June.
    3. Jana Laštůvková, 2016. "Liquidity Forms and Bank Size," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 1999-2006.
    4. Yao, Yanzhen & Li, Jianping & Zhu, Xiaoqian & Wei, Lu, 2017. "Expected default based score for identifying systemically important banks," Economic Modelling, Elsevier, vol. 64(C), pages 589-600.
    5. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.

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