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Systemic surcharges and measures of systemic importance

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  • Sigbjørn Atle Berg

Abstract

Purpose - There is an emerging consensus that systemically important banks should face stricter regulations and systemic surcharges. To make this latter principle operational the regulator will need to quantify the systemic importance of individual banks. The purpose of this paper is to review the proposed measures of systemic importance from the research community and discuss their merits relative to how a regulator would ideally wish to calibrate surcharges on systemically important banks, and to evaluate how useful proposed measures of the systemic importance of financial institutions will be to regulators. Design/methodology/approach - The author reviews the main contributions to the research literature and discusses their relevance for the problem faced by regulators. Findings - There are five main caveats that make the proposed measures of systemic importance less useful for regulators. Practical implications - The proposed measures may help identify relevant aspects of systemic importance, but the regulators will need to construct their own measures for practical use. Originality/value - The paper provides a critical review of a research literature that could potentially have large practical implications.

Suggested Citation

  • Sigbjørn Atle Berg, 2011. "Systemic surcharges and measures of systemic importance," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(4), pages 383-395, November.
    • Handle: RePEc:eme:jfrcpp:v:19:y:2011:i:4:p:383-395
    DOI: 10.1108/13581981111182974
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    References listed on IDEAS

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    1. 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.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    4. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Risk Assessment for Banking Systems," Management Science, INFORMS, vol. 52(9), pages 1301-1314, September.
    5. Huang, Xin & Zhou, Hao & Zhu, Haibin, 2012. "Assessing the systemic risk of a heterogeneous portfolio of banks during the recent financial crisis," Journal of Financial Stability, Elsevier, vol. 8(3), pages 193-205.
    6. Drehmann, Mathias & Tarashev, Nikola, 2013. "Measuring the systemic importance of interconnected banks," Journal of Financial Intermediation, Elsevier, vol. 22(4), pages 586-607.
    7. Céline Gauthier & Alfred Lehar & Moez Souissi, 2010. "Macroprudential Regulation and Systemic Capital Requirements," Staff Working Papers 10-4, Bank of Canada.
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    Cited by:

    1. Michal Skorepa & Jakub Seidler, 2015. "Capital buffers based on banks’ domestic systemic importance: selected issues," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 7(3), pages 207-220, August.
    2. Josef Brechler & Vaclav Hausenblas & Zlatuse Komarkova & Miroslav Plasil, 2014. "Similarity and Clustering of Banks: Application to the Credit Exposures of the Czech Banking Sector," Research and Policy Notes 2014/04, Czech National Bank.
    3. Zlatuse Komarkova & Vaclav Hausenblas & Jan Frait, 2012. "How To Identify Systemically Important Financial Institutions," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2011/2012, chapter 0, pages 100-111, Czech National Bank.
    4. Roszkowska Paulina & Prorokowski Łukasz, 2013. "Model of Financial Crisis Contagion: A Survey-based Simulation by Means of the Modified Kaplan-Meier Survival Plots," Folia Oeconomica Stetinensia, Sciendo, vol. 13(1), pages 22-55, December.

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