Smart systemic-risk scores

Sylvain Benoit

Journal of International Money and Finance, 2024, vol. 140, issue C

Abstract: This paper proposes a new systemic-risk score to identify and regulate global systemically important banks (G-SIBs) by using an alternative weighting scheme based on volatility to aggregate all systemic-risk facets. Following a portfolio management approach, I equalize the risk contribution of each systemic-risk component to the cross-sectional volatility of the smart systemic-risk scores. The equally-weighted risk contribution (ERC) method appears to be a relevant alternative to the cap on the substitutability category. To discriminate between several systemic-risk scores, I modify and apply the axiomatic framework of Chen et al. (2013) to express supervisor preferences among systemic-risk scores. Such preferences are based on the expected value of the cross-sectional dispersion of systemic-risk scores over the years.

Keywords: Systemic risk; Risk management; Macroprudential regulation; Global systemically important banks (search for similar items in EconPapers)
JEL-codes: G01 G28 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:140:y:2024:i:c:s0261560623001699

DOI: 10.1016/j.jimonfin.2023.102968

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