Journal of Financial Intermediation Vol. 38 2019
Pitfalls in systemic-risk scoring
Abstract
In this paper, we identify several shortcomings in the systemic-risk scoring methodology currently used to identify and regulate Systemically Important Financial Institutions (SIFIs). Using newly-disclosed regulatory data for 119 US and international banks, we show that the current scoring methodology severely distorts the allocation of regulatory capital among banks. We then propose and implement a methodology that corrects for these shortcomings and increases incentives for banks to reduce their risk contributions.
- DOI
- 10.1016/j.jfi.2018.05.004
- Volume
- 38
- Pages
- 19-44
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref