Modelling Systemically Important Banks vis-à-vis the Basel Prudential Guidelines

M. Zulkifli Salim; Kevin Daly

doi:10.3390/jrfm14070295

Modelling Systemically Important Banks vis-à-vis the Basel Prudential Guidelines

M. Zulkifli Salim
, Kevin Daly

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

Our paper investigates Indonesia's systemically important banks (SIBs) using theoretical approaches"”CoVaR, marginal expected shortfall (MES), and SRISK"”to compare with the Basel guidelines as benchmark. We use Indonesian banks' market and supervisory data over the 2008-2019 period. The research aims to seek intertheoretical model interaction and SIB ranking in concordance with the Basel guidelines as applied by a bank supervisor. The findings show that SRISK produced a more consistent ranking compared with CoVaR and MES. CoVaR and MES had higher intermodel correlation converted to 59% similarity in rankings. Further, all theoretical models are in line with the Basel guidelines, where the closest approximation is at 47%. The results indicate that policy makers could use scholarly models as validation tools and help improve supervision decision to identify systemically important institutions.

Original language	English
Article number	295
Number of pages	21
Journal	Journal of Risk and Financial Management
Volume	14
Issue number	7
DOIs	https://doi.org/10.3390/jrfm14070295
Publication status	Published - Jul 2021

Bibliographical note

Publisher Copyright:
© 2021 by the authors.

Open Access - Access Right Statement

© 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

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SDG 10 Reduced Inequalities

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10.3390/jrfm14070295

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abstract = "Our paper investigates Indonesia's systemically important banks (SIBs) using theoretical approaches{"}”CoVaR, marginal expected shortfall (MES), and SRISK{"}”to compare with the Basel guidelines as benchmark. We use Indonesian banks' market and supervisory data over the 2008-2019 period. The research aims to seek intertheoretical model interaction and SIB ranking in concordance with the Basel guidelines as applied by a bank supervisor. The findings show that SRISK produced a more consistent ranking compared with CoVaR and MES. CoVaR and MES had higher intermodel correlation converted to 59\% similarity in rankings. Further, all theoretical models are in line with the Basel guidelines, where the closest approximation is at 47\%. The results indicate that policy makers could use scholarly models as validation tools and help improve supervision decision to identify systemically important institutions.",

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Modelling Systemically Important Banks vis-à-vis the Basel Prudential Guidelines

Abstract

Bibliographical note

Open Access - Access Right Statement

UN SDGs

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