On Identifying the Systemically Important Tunisian Banks: An Empirical Approach Based on the ?CoVaR Measures

Wided Khiari and Salim Ben Sassi
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Wided Khiari: Institut Supérieur de Gestion, University of Tunis, Le Bardo 2000, Tunisia
Salim Ben Sassi: Institut Supérieur de Gestion, University of Tunis, Le Bardo 2000, Tunisia

Risks, 2019, vol. 7, issue 4, 1-15

Abstract: The aim of this work is to assess systemic risk of Tunisian listed banks. The goal is to identify the institutions that contribute the most to systemic risk and that are most exposed to it. We use the CoVaR that considered the systemic risk as the value at risk (VaR) of a financial institution conditioned on the VaR of another institution. Thus, if the CoVaR increases with respect to the VaR, the spillover risk also increases among the institutions. The difference between these measurements is termed ?CoVaR, and it allows for estimating the exposure and contribution of each bank to systemic risk. Results allow classifying Tunisian banks in terms of systemic risk involvement. They show that public banks occupy the top places, followed by the two largest private banks in Tunisia. These five banks are the main systemic players in the Tunisian banking sector. It seems that they are the least sensitive to the financial difficulties of existing banks and the most important contributors to the distress of the other banks. This work aims to add a broader perspective to the micro prudential application of regulation, including contagion, proposing a macro prudential vision and strengthening of regulatory policy. Supervisors could impose close supervision for institutions considered as potentially systemic banks. Furthermore, regulations should consider the systemic contribution when defining risk requirements to minimize the consequences of possible herd behavior.

Keywords: systemic risk; value at risk; quantile regression; CoVaR; cartography (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:7:y:2019:i:4:p:122-:d:297153

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