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Where is the System?

Author

Listed:
  • Sylvain Benoît

    (LEDA-SDFi - Stratégie et Dynamiques Financières - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to determine the optimal size of the system (global, supranational or national) when measuring the systemic importance of a bank. Since 2011, the Basel Committee on Banking Supervision (BCBS) has tagged global systemically important banks (G-SIBs) and has imposed a higher regulatory capital of loss absorbency (HLA) requirement. However, the identification of G-SIBs may overlook banks with major domestic systemic importance, i.e. the domestic systemically important banks (D-SIBs). This paper describes how to adjust market-based systemic risk measures to identify D-SIBs. In an empirical analysis within the eurozone, I show that (i) the SRISK methodology produces similar rankings whatever the system used. However, (ii) the SRISK values greatly vary across systems, which calls for imposing the higher of either D-SIB or G-SIB HLA requirements. Finally, (iii) the ΔCoVaR methodology is extremely sensitive to the choice of the system.

Suggested Citation

  • Sylvain Benoît, 2014. "Where is the System?," Post-Print hal-01490644, HAL.
    • Handle: RePEc:hal:journl:hal-01490644
    DOI: 10.1016/j.inteco.2013.11.004
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    Citations

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    Cited by:

    1. Buch, Claudia M. & Krause, Thomas & Tonzer, Lena, 2019. "Drivers of systemic risk: Do national and European perspectives differ?," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 160-176.
    2. Mikhail Stolbov, 2017. "Assessing systemic risk and its determinants for advanced and major emerging economies: the case of ΔCoVaR," International Economics and Economic Policy, Springer, vol. 14(1), pages 119-152, January.
    3. Andrieş, Alin Marius & Nistor, Simona & Sprincean, Nicu, 2020. "The impact of central bank transparency on systemic risk—Evidence from Central and Eastern Europe," Research in International Business and Finance, Elsevier, vol. 51(C).
    4. Jacob Kleinow & Tobias Nell, 2015. "Determinants of systemically important banks: the case of Europe," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 7(4), pages 446-476, November.
    5. Pham, Thach N. & Powell, Robert & Bannigidadmath, Deepa, 2021. "Systemically important banks in Asian emerging markets: Evidence from four systemic risk measures," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).

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