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"Too big to fail" or "Too non-traditional to fail"?: The determinants of banks' systemic importance

  • Moore, Kyle
  • Zhou, Chen

This paper empirically analyzes the determinants of banks' systemic importance. In constructing a measure on the systemic importance of financial institutions we find that size is a leading determinant. This confirms the usual "Too big to fail'' argument. Nevertheless, banks with size above a sufficiently high level have equal systemic importance. In addition to size, we find that the extent to which banks engage in non-traditional banking activities is also positively related to banks' systemic importance. Therefore, in addition to ``Too big to fail", systemically important financial institutions can also be identified by a "Too non-traditional to fail" principle.

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File URL: http://mpra.ub.uni-muenchen.de/45589/1/MPRA_paper_45589.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45589.

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Date of creation: 23 Feb 2013
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Handle: RePEc:pra:mprapa:45589
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  1. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics.
  2. Viral V. Acharya & Douglas Gale & Tanju Yorulmazer, 2010. "Rollover Risk and Market Freezes," NBER Working Papers 15674, National Bureau of Economic Research, Inc.
  3. Acharya, Viral V & Pedersen, Lasse H & Philippon, Thomas & Richardson, Matthew P, 2012. "Measuring Systemic Risk," CEPR Discussion Papers 8824, C.E.P.R. Discussion Papers.
  4. Beverly J. Hirtle & Jose A. Lopez, 1999. "Supervisory information and the frequency of bank examinations," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 1-20.
  5. Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2005. "Banking system stability: a cross-Atlantic perspective," Working Paper Series 0527, European Central Bank.
  6. repec:fip:fedhpr:y:2010:i:may:p:65-71 is not listed on IDEAS
  7. repec:sae:ecolab:v:16:y:2006:i:2:p:1-2 is not listed on IDEAS
  8. Chen Zhou, 2010. "Are Banks Too Big to Fail? Measuring Systemic Importance of Financial Institutions," International Journal of Central Banking, International Journal of Central Banking, vol. 6(34), pages 205-250, December.
  9. Olivier De Jonghe, 2009. "Back to the basics in banking ? A micro-analysis of banking system stability," Working Paper Research 167, National Bank of Belgium.
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