Where is the System?

Sylvain Benoît
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Sylvain Benoît: LEDA-SDFi - Stratégie et Dynamiques Financières - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: The aim of this paper is to determine the optimal size of the system (global, supranational or national) when measuring the systemic importance of a bank. Since 2011, the Basel Committee on Banking Supervision (BCBS) has tagged global systemically important banks (G-SIBs) and has imposed a higher regulatory capital of loss absorbency (HLA) requirement. However, the identification of G-SIBs may overlook banks with major domestic systemic importance, i.e. the domestic systemically important banks (D-SIBs). This paper describes how to adjust market-based systemic risk measures to identify D-SIBs. In an empirical analysis within the eurozone, I show that (i) the SRISK methodology produces similar rankings whatever the system used. However, (ii) the SRISK values greatly vary across systems, which calls for imposing the higher of either D-SIB or G-SIB HLA requirements. Finally, (iii) the ΔCoVaR methodology is extremely sensitive to the choice of the system.

Keywords: Systemic risk; Financial regulation; SRISK; G-SIBs; D-SIBs (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

Published in International Economics, 2014, 138, ⟨10.1016/j.inteco.2013.11.004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01490644

DOI: 10.1016/j.inteco.2013.11.004

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