Identifying, ranking and tracking systemically important financial institutions (SIFIs), from a global, EU and Eurozone perspective

Masciantonio, Sergio (2013): Identifying, ranking and tracking systemically important financial institutions (SIFIs), from a global, EU and Eurozone perspective.

Abstract

This paper develops a methodology to identify systemically important financial institutions building on that developed by the BCBS (2011) and used by the Financial Stability Board in its yearly G-SIFIs identification. This methodology is based on publicly available data, providing fully transparent results with a G-SIFIs list that helps to bridge the gap between market knowledge and supervisory decisions. Moreover the results encompass a complete ranking of the banks considered, according to their systemic importance scores. The methodology has then been applied to EU and Eurozone samples of banks to obtain their systemic importance ranking and SIFIs lists. A statistical analysis and some geographical and historical evidence provide further insight into the notion of systemic importance, its policy implications and the future applications of this methodology.

• Item Type: MPRA Paper
• Language: English
• Keywords: banks, balance sheets, systemic risk, SIFIs, financial stability, regulation
• Subjects: C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C81 - Methodology for Collecting, Estimating, and Organizing Microeconomic Data ; Data Access; G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

References

Acharya, Viral V., Lasse Heje Pedersen, Thomas Philippon, Matthew P. Richardson, 2010, “Measuring systemic risk”, FRB of Cleveland Working Paper No. 10-02, May 2010

Adrian, Tobias and Markus K. Brunnenmeier, “CoVaR”, NBER Working Paper No. 17454, October 2011

Angelini, Paolo, Sergio Nicoletti-Altimari and Ignazio Visco, 2012, "Macroprudential, Microprudential and Monetary Policies: Conflicts, Complementarities and Trade-offs", Bank of Italy Occasion Papers No. 144, November 2012

Basel Commitee on Banking Supervision (BCBS), 2011, "Global systemically important banks: assessment methodology and the additional loss absorbency requirement", Bank for International settlements, Rule Text, November 2011

Basel Commitee on Banking Supervision (BCBS), 2012, "A framework for dealing with domestic systemically important banks", Bank for International Settlements, Consultative Document, June 2012

Deutsche Bank (DB) Research, 2011, “Identifying systemically important financial institutions (SIFIs)”, Deutsche Bank Research, Current Issues, International Topics, August 11, 2011

Drehmann, Mathias and Nikola Tarashev, 2011, “Measuring the systemic importance of interconnected banks”, Bank for International Settlements, BIS Working Papers No. 342, March 2011

Dungey, Mardi, Matteo Luciani and David Veredas, 2012, “Ranking Systemically Important Financial Institutions”, ECARES Working Paper 2012-037

Elliott, Douglas J., 2012, “Designating Systematicall Important Financial Institutions: Balancing Costs and Benefits”, Testimony before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, 2012

European Central Bank (ECB), 2006, “Identifying Large and Complex Banking Groups for Financial Stability Assessment”, European Central Bank, Financial Stability Review, December 2006

European Central Bank (ECB), 2010a, “Analytical Models and Tools for the Identification and Assessment of Systemic Risks”, European Central Bank, Financial Stability Review, June 2010

European Central Bank (ECB), 2010b, “New Quatitative Measures of Systemic Risk”, European Central Bank, Financial Stability Review, December 2010

Financial Stability Board (FSB), 2011, “Policy Measures to Address Systemically Important Financial Institutions”, 4 November 2011

Financial Stability Board (FSB), 2012, “Update of group of global systemically important banks (G-SIBs)”, 1 November 2012

Gibbons, Jean Dickinson, and Subhabrata Chakraborti, 2003, “Nonparametric Statistical Inference”, Marcel Dekker Inc., 4th Revised edition, 9 May 2003

Keller, Annette and Frank Klawonn, 2000, “Fuzzy clustering with weighting of data variables”, International Journal of Uncertainty, Fuzziness and Knowledge-Based Systems

International Monetary Fund, Bank for International Settlements, Financial Stability Board (IMF/BIS/FSB), 2009, "Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations", Report to the G-20 Finance Ministers and Central Bank Governors, October 2009

Huang, Xin, Hao Zhou and Haibin Zhu, 2012, “Systemic Risk Contributions”, Journal of Financial Services Research, October 2012, Volume 42, Issue 1-2, pp 55-83

Moore, Kyle and Chen Zhou, 2012, “’Too Big to Fail’ or ‘Too Non-Traditional to Fail’?: The Determinants of Banks' Systemic Importance”, SSRN Working Paper Seriers

Morris, Max D., 1991, “Factorial Sampling Plans for Preliminary Computational Experiments”, Technometrics, Vol. 33, No. 2. (May, 1991)

Saltelli, Andrea, Marco Ratto, Stefano Tarantola and Francesca Campolongo, 2006, “Sensitivity analysis practices: Strategies for model-based inference”, Reliability Engineering & System Safety, Volume 91, Issues 10-11, October-November 2006

Securities and Exchange Commission (SEC), 2011, “A Comparison of US GAAP and IFRS. Work plan for the consideration of incorporating international financial reporting standards into the financial reporting system for US issuers”, A Securities and Exchange Commission Staff Paper, November 16, 2011

Taraashev, Nikola, Claudio Borio and Kostas Tsatsaronis, 2009, “The systemic importance of financial institutions”, Bank for International Settlements, BIS Quarterly Review, September 2009

Trichet, Jean-Claude, 2009, “Systemic Risk”, Clare Distinguished Lecture in Economics and Public Policy, Clare College, University of Cambridge, 10 December 2009

Ueda, Kenichi and Beatrice Weder di Mauro, 2012, “Quantifying Structural Subsidy Values for Systemically Important Financial Institutions”, IMF Working Paper, WP/12/128, May 2012