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How To Identify Systemically Important Financial Institutions

In: CNB Financial Stability Report 2011/2012

Author

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  • Zlatuse Komarkova
  • Vaclav Hausenblas
  • Jan Frait

Abstract

The crisis has brought the issue of regulating large, complex and highly interconnected financial institutions back into the spotlight. Supervisory and other competent authorities have discovered that they have only limited ways of preventing an idiosyncratic shock in one institution from turning into a system-wide shock and of stopping the contagion spreading to other domestic and foreign financial institutions. This article aims to draw attention to the risks associated with the existence of systemically important financial institutions. It discusses methods for identifying systemically important financial institutions, including the approach proposed by BCBS (2011b), which is applied to the Czech banking system for illustration. Overall, our systemic importance results show that there is a large number of normally important financial institutions on average and a very small number of more important institutions. Moreover, there is high variance among the most important institutions in the results. In connection with the newly proposed regulation, the article presents possible instruments for increasing the resilience of such institutions to systemic risk.

Suggested Citation

  • Zlatuse Komarkova & Vaclav Hausenblas & Jan Frait, 2012. "How To Identify Systemically Important Financial Institutions," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2011/2012, chapter 0, pages 100-111, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:fsr1112/1
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    References listed on IDEAS

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    Cited by:

    1. Michal Skorepa & Jakub Seidler, 2015. "Capital buffers based on banks’ domestic systemic importance: selected issues," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 7(3), pages 207-220, August.
    2. Michal Skorepa, 2014. "Concurrent Capital Buffers in a Banking Group," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2013/2014, chapter 0, pages 128-136, Czech National Bank.
    3. G. Gospodarchuk G. & E. Suchkova O. & Г. Господарчук Г. & Е. Сучкова О., 2018. "Совершенствование Критериев Идентификации Системно Значимых Банков На Основе Кросс-Секторального Подхода // The Improvement Of Criteria For Identification Of Systemically Important Banks Based On Cros," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 22(4), pages 18-37.
    4. Deev, Oleg & Lyócsa, Štefan, 2020. "Connectedness of financial institutions in Europe: A network approach across quantiles," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 550(C).
    5. Pagliacci, Carolina & Peña, Jennifer, 2016. "Riesgos sistémicos en el mercado interbancario en Venezuela: 2004-2014 [Systemic risk in the Venezuelan interbank market: 2004-2014]," MPRA Paper 106548, University Library of Munich, Germany.
    6. Josef Brechler & Vaclav Hausenblas & Zlatuse Komarkova & Miroslav Plasil, 2014. "Similarity and Clustering of Banks: Application to the Credit Exposures of the Czech Banking Sector," Research and Policy Notes 2014/04, Czech National Bank.
    7. Michal Skorepa & Jakub Seidler, 2013. "An Additional capital requirements based on the domestic systemic importance of a bank," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2012/2013, chapter 0, pages 96-102, Czech National Bank.
    8. Michal Dvorak & Marcela Gronychova & Vaclav Hausenblas & Zlatuse Komarkova, 2016. "Could the Czech Insurance Sector Be a Source of Systemic Risk?," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2015/2016, chapter 0, pages 116-126, Czech National Bank.
    9. Lu, Jing & Hu, Xiaohong, 2014. "Novel three-bank model for measuring the systemic importance of commercial banks," Economic Modelling, Elsevier, vol. 43(C), pages 238-246.
    10. Adam Kucera & Milan Szabo, 2021. "Interconnectedness and contagion in the Czech financial system," Occasional Publications - Chapters in Edited Volumes,, Czech National Bank.
    11. Berlinger, Edina & Dömötör, Barbara & Daróczi, Gergely & Vadász, Tamás, 2017. "Pénzügyi hálózatok mag-periféria szerkezete. A magyar bankközi fedezetlen hitelek piaca, 2003-2012 [The core periphery structure of financial networks: investigating Hungary s interbank deposit mar," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1160-1185.

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