Systemic risk and bank business models

M. van Oordt, C. Zhou

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

In this paper, we decompose banks' systemic risk into two dimensions: the risk of a bank (“bank tail risk”) and the link of the bank to the system in financial distress (“systemic linkage”). Based on extreme value theory, we estimate a systemic risk measure that can be decomposed into two subcomponents reflecting these dimensions. Empirically, we assess the relationships of bank business models to the two dimensions of systemic risk. The observed differences in these relationships partly explain why micro- and macroprudential perspectives sometimes have different implications for banking regulation.
Original languageEnglish
Pages (from-to)365-384
JournalJournal of Applied Econometrics
Volume34
Issue number3
DOIs
Publication statusPublished - 2019
Externally publishedYes

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