Smart systemic-risk scores

Sylvain Benoit
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Sylvain Benoit: 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: This paper proposes a new systemic-risk score to identify and regulate global systemically important banks (G-SIBs) by using an alternative weighting scheme based on volatility to aggregate all systemic-risk facets. Following a portfolio management approach, I equalize the risk contribution of each systemic-risk component to the cross-sectional volatility of the smart systemic-risk scores. The equally-weighted risk contribution (ERC) method appears to be a relevant alternative to the cap on the substitutability category. To discriminate between several systemic-risk scores, I modify and apply the axiomatic framework of Chen et al. (2013) to express supervisor preferences among systemic-risk scores. Such preferences are based on the expected value of the cross-sectional dispersion of systemic-risk scores over the years.

Keywords: Systemic Risk; Risk Management; Macroprudential Regulation; Systemically Important Financial Institutions; Banking (search for similar items in EconPapers)
Date: 2024
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Published in Journal of International Money and Finance, 2024, 140

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04495254

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