The analytical framework for identifying and benchmarking systemically important financial institutions in Europe

Renata Karkowska

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this article is to identify systemically important banks on a European scale, in accordance with the criteria proposed by the supervisory authorities. In this study we discuss the analytical framework for identifying and benchmarking systemically important financial institutions. An attempt to define systemically important institutions is specified their characteristics under the existing and proposed regulations. In a selected group of the largest banks in Europe the following indicators ie.: leverage, liquidity, capital ratio, asset quality and profitability are analyzed as a source of systemic risk. These figures will be confronted with the average value obtained in the whole group of commercial banks in Europe. It should help finding the answer to the question, whether the size of the institution generates higher systemic risk? The survey will be conducted on the basis of the financial statements of commercial banks in 2007 and 2010 with the available statistical tools, which should reveal the variability of risk indicators over time. We find that the largest European banks were characterized by relative safety and without excessive risk in their activities. Therefore, a fundamental feature of increased regulatory limiting systemic risk should understand the nature and sources of instability, and mobilizing financial institutions (large and small) to change their risk profile and business models in a way that reduces the instability of the financial system globally.

Keywords: banking; Systematically Important Financial Institutions; SIFI; systemic risk; liquidity; leverage; profitability (search for similar items in EconPapers)
JEL-codes: C1 F36 F65 G21 G32 G33 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
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Published in Faculty of Management Working Paper Series 4/2014 (2014): pp. 1-19

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Working Paper: The Analytical Framework For Identifying And Benchmarking Systemically Important Financial Institutions In Europe (2014)
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