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Systemically Important Banks:A Permutation Test Approach

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  • Lorenzo Frattarolo
  • Francesca Parpinel
  • Claudio Pizzi

Abstract

According to the definition of Financial Stability Board (FSB), Systemically Important Banks (SIBs) are the banks "whose disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity". The current methodology for their determination is based on balance-sheet variables and expert judgment. We use permutation tests to investigate the relevance of equity-based systemic risk measures in the SIBs choice. Restriction of the analysis to European Banks, for which full information is available, allows understanding the importance of equity-based systemic risk measures also for size, interconnectedness, substitutability/financial Institution Infrastructure, complexity and cross-jurisdictional Activity categories.
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Suggested Citation

  • Lorenzo Frattarolo & Francesca Parpinel & Claudio Pizzi, 2016. "Systemically Important Banks:A Permutation Test Approach," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 70(3), pages 41-52, July-Sept.
    • Handle: RePEc:ite:iteeco:160304
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    References listed on IDEAS

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    1. Bongini, Paola & Nieri, Laura & Pelagatti, Matteo, 2015. "The importance of being systemically important financial institutions," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 562-574.
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    1. Lorenzo Frattarolo & Francesca Parpinel & Claudio Pizzi, 2020. "Combining permutation tests to rank systemically important banks," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 29(3), pages 581-596, September.

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • 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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