Where is the System?
Benoit, Sylvain (2014), Where is the System?, International Economics, 138, p. 1-27. 10.1016/j.inteco.2013.11.004
TypeArticle accepté pour publication ou publié
Journal nameInternational Economics
MetadataShow full item record
Abstract (EN)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.
Subjects / KeywordsSystemic risk; Financial regulation; SRISK; G-SIBs; D-SIBs
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