Articles

Pitfalls in Systemic-Risk Scoring

S. BENOIT, C. HURLIN, C. PERIGNON

Journal of Financial Intermediation

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Banking, Macroprudential regulation, Systemically Important Financial Institutions, Financial crises, Financial risk and risk management

https://www.sciencedirect.com/science/article/pii/S1042957318300366


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


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