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Bank size, capital, and systemic risk: Some international evidence

Author

Listed:
  • Laeven, Luc
  • Ratnovski, Lev
  • Tong, Hui

Abstract

This paper studies the significant variation in the cross-section of standalone and systemic risk of large banks during the recent financial crisis to identify bank specific factors that determine risk. We find that systemic risk grows with bank size and is inversely related to bank capital, and this effect exists above and beyond the effect of bank size and capital on standalone bank risk. Our results contribute to the ongoing debate on the merits of imposing systemic risk-based capital requirements on banks.

Suggested Citation

  • Laeven, Luc & Ratnovski, Lev & Tong, Hui, 2016. "Bank size, capital, and systemic risk: Some international evidence," Journal of Banking & Finance, Elsevier, vol. 69(S1), pages 25-34.
    • Handle: RePEc:eee:jbfina:v:69:y:2016:i:s1:p:s25-s34
    DOI: 10.1016/j.jbankfin.2015.06.022
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    More about this item

    Keywords

    Banking crisis; Bank performance; Bank fragility; Systemic risk; Financial regulation;
    All these keywords.

    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

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