Systemic Risk Measurement: Bucketing G-SIBs Between Literature and Supervisory View

57 Pages Posted: 13 Feb 2017 Last revised: 15 Nov 2017

See all articles by Marina Brogi

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati

Valentina Lagasio

Sapienza University

Luca Riccetti

Università degli Studi di Macerata

Date Written: February 10, 2017

Abstract

The general consensus on the need to enhance the resilience of the financial system has led to the imposition of higher capital requirements for certain institutions, supposedly based on their contribution to systemic risk. Global Systemically Important Banks (G-SIBs) are divided into buckets based on their required additional capital buffers ranging from 1% to 3.5%. We measure the marginal contribution to systemic risk of 26 G-SIBs using the Distressed Insurance Premium methodology proposed by Huang et al. (2009) and examine ranking consistency with that using the SRISK of Acharya et al. (2012). We then compare bucketing using the two academic approaches and supervisory buckets. Because it leads to capital surcharges, bucketing should be consistent, irrespective of methodology. Instead, discrepancies in the allocation between buckets emerge and this suggests the complementary use of other methodologies.

Keywords: Systemic risk, Systemically Important Financial Institution, Financial Crisis, Financial regulation, Capital requirements

JEL Classification: G01, G28, G21

Suggested Citation

Brogi, Marina and Lagasio, Valentina and Riccetti, Luca, Systemic Risk Measurement: Bucketing G-SIBs Between Literature and Supervisory View (February 10, 2017). Available at SSRN: https://ssrn.com/abstract=2915172 or http://dx.doi.org/10.2139/ssrn.2915172

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati ( email )

Rome
Italy

Valentina Lagasio

Sapienza University ( email )

Via del Castro Laurenziano, 9
Rome, 00185
Italy

Luca Riccetti (Contact Author)

Università degli Studi di Macerata ( email )

via Crescimbeni
Macerata
Italy

HOME PAGE: http://docenti.unimc.it/luca.riccetti

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