Pitfalls in systemic-risk scoring

Sylvain Benoît, Christophe Hurlin and Christophe Perignon ()
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Sylvain Benoît: LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres

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Abstract: In this paper, we identify several shortcomings in the systemic-risk scoring methodology currently used to identify and regulate Systemically Important Financial Institutions (SIFIs). Using newly-disclosed regulatory data for 119 US and international banks, we show that the current scoring methodology severely distorts the allocation of regulatory capital among banks. We then propose and implement a methodology that corrects for these shortcomings and increases incentives for banks to reduce their risk contributions.

Keywords: Banking; Macroprudential regulation; Systemically Important Financial Institutions; Financial crises; Financial risk and risk management (search for similar items in EconPapers)
Date: 2019-04
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Citations: View citations in EconPapers (24)

Published in Journal of Financial Intermediation, 2019, 38, pp.19-44. ⟨10.1016/j.jfi.2018.05.004⟩

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Related works:
Journal Article: Pitfalls in systemic-risk scoring (2019)
Working Paper: Pitfalls in Systemic-Risk Scoring (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02292305

DOI: 10.1016/j.jfi.2018.05.004

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