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Domestic Systemically Important Banks: An Indicator-Based Measurement Approach for the Australian Banking System

Author

Listed:
  • Patrick Brämer

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Horst Gischer

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

This paper serves as a response to the assessment methodology of the Basel Committee on Banking Supervision to identify systemically important banks. Based on the official technique, which requires an extensive collection of bank data, our paper develops a practicable modification. Utilising readily available indicators, we determine the domestic systemic risk of each licensed bank in Australia in the period 2002-2011. Our quantitative results uncover not only high levels of systemic risk for the four major banks, but their rising dominance during the global financial crisis. Consequently, we introduce a regulatory proposal that enables authorities to reduce the systemic risk of individual institutions.

Suggested Citation

  • Patrick Brämer & Horst Gischer, 2012. "Domestic Systemically Important Banks: An Indicator-Based Measurement Approach for the Australian Banking System," FEMM Working Papers 120003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:120003
    as

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    References listed on IDEAS

    as
    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.
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    3. Acharya, Viral V. & Yorulmazer, Tanju, 2007. "Too many to fail--An analysis of time-inconsistency in bank closure policies," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 1-31, January.
    4. Mr. Martin Cihak & Simon Wolfe & Mr. Klaus Schaeck, 2006. "Are More Competitive Banking Systems More Stable?," IMF Working Papers 2006/143, International Monetary Fund.
    5. Beck, Thorsten, 2008. "Bank competition and financial stability : friends or foes ?," Policy Research Working Paper Series 4656, The World Bank.
    6. Robert A. Eisenbeis, 2009. "What We Have Learned and Not Learned from the Current Crisis about Financial Reform," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 457-469, December.
    7. Nicola Cetorelli, 2001. "Competition among banks: good or bad?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 25(Q II), pages 38-48.
    8. R. J. Edgar, 2009. "The Future of Financial Regulation: Lessons from the Global Financial Crisis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 470-476, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Basel III; financial regulation; indicator-based measurement; systemic risk;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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