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A liquidity risk index as a regulatory tool for systemically important banks? An empirical assessment across two financial crises

Gianfranco Gianfelice (), Giuseppe Marotta () and Costanza Torricelli ()

Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) from Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi"

Abstract: We provide an assessment of the IMF suggestion, based on Severo (2012), to use an index of systemic liquidity risk (SLRI) that could help to estimate a Pigouvian tax on large banks for the externality on the international banking system out of their risk exposure. To this end we compute a parsimonious and fully documented SLRI and investigate its statistical significance in explaining level and variability of stock returns for a group of large international banks during the subprime financial and the Eurozone sovereign debt crises. The empirical investigation consistently fails to detect, within and across the two crises, a core group among the systemically important banks listed by the Financial Stability Board and thus supports a sceptical assessment of the proposal.

Keywords: subprime crisis; Eurozone sovereign crisis; systemic risk; banks’ stock returns; macroprudential regulation (search for similar items in EconPapers)
JEL-codes: C58 G01 G12 G13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
Date: 2013-07
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Journal Article: A liquidity risk index as a regulatory tool for systemically important banks? An empirical assessment across two financial crises (2015) Downloads
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Persistent link: http://EconPapers.repec.org/RePEc:mod:wcefin:13071

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