Novel three-bank model for measuring the systemic importance of commercial banks

Jing Lu and Xiaohong Hu

Economic Modelling, 2014, vol. 43, issue C, 238-246

Abstract: Relaxing the hypothesis on the scale level of a bank, the present paper develops an improved three-bank model for analyzing the relationship between the size and the systemic importance of a bank. The proposed model is more general and more operational compared with other models. By introducing the L function based on the multivariate extreme theory and the systemically important index, the effect of the size on the systemic importance of a bank is analyzed. The size is found to be a necessary but insufficient condition for measuring the systemic importance of a bank. The size of a bank plays a critical role in evaluating systemic importance, but when the size reaches a certain threshold, its effect is weakened. The current study has theoretical and practical significance for the recognition and supervision of the systemic importance of banks.

Keywords: Systemic importance of banks; Systemic risk; Size of bank; Multivariate extreme theory (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:43:y:2014:i:c:p:238-246

DOI: 10.1016/j.econmod.2014.08.007

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