On the measurement of bank vulnerability

Yuliang Zhang

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: I introduce an index that formulates the vulnerability of the banking sector from a systemic risk perspective. It is expressed in terms of the size-weighted leverage and the illiquidity-weighted Herfindahl–Hirschman Index. The empirical implementation is demonstrated using balance sheet data from U.S. bank holding companies during 2001–2024 and national banks during the Great Depression. The index can be used to monitor financial instability, activate macroprudential capital buffers, and analyse historical banking crises.

Keywords: measurement; financial vulnerability; macroprudential policy; banking crises (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2026-03-10
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mon and nep-rmg
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Published in Quantitative Finance, 10, March, 2026, pp. 1 - 9. ISSN: 1469-7688

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