scholarly journals Systemic risk contribution of banks and non-bank financial institutions across frequencies: The Australian experience

2021 ◽  
pp. 101992
Author(s):  
Md Lutfur Rahman ◽  
Victor Troster ◽  
Gazi Salah Uddin ◽  
Muhammad Yahya
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Risk Contribution ◽  
Australian Experience

Bank mergers: the cyclical behaviour of regulation, risk and returns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohamad Hassan ◽  
Evangelos Giouvris
Keyword(s):  
Technical Efficiency ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Financial Institution ◽  
Capital Requirements ◽  
Policy Implications ◽  
Bank Mergers ◽  
Content Type ◽  
Risk Contribution ◽  
The Impact

Purpose The purpose of this paper is to examine the effects of bank mergers on systemic and systematic risks on the relative merits of product and market diversification strategies. It also observes determinants of M&A deals criteria, product and market diversification positioning, crisis threshold and other regulatory and market factors. Design/methodology/approach This research examines the impact and association between merger announcements and regulatory reforms at bank and system levels by investigating the impact of various bank consolidation strategies on firms’ risks. We estimate beta(s) as an index of financial institutions’ systematic risk. We then develop an index of the estimated equity value loss as the long-rum marginal expected shortfall (LRMES). LRMES contributes to compute systemic risk (SRISK) contribution of these firms, which is the capital that a firm is expected to need if we have another financial crisis. Findings Large acquiring banks decrease systemic risk contribution in cross-border M&As with a non-bank financial institution, and witness profitability (ROA) gains, supporting geographic diversification stability. Capital requirements, activity restrictions and bank concentration increase systemic risk contribution in national mergers. Bank mergers with investment FIs targets enhance productivity but impair technical efficiency, contrary to bank-real estate deals where technical efficiency change accompanied lower systemic risk contribution. Practical implications Financial institutions are recommended to avoid trapped capital and liquidity by efficiently using local balance sheet and strengthening them via implementing models that clearly set diversification and netting benefits to determine capital reserves and to drive capital efficiency through the clarity on product–activity–geography diversification and focus. This contributes to successful ringfencing, decreases compliance costs and maximises returns and minimises several risks including systemic risk. Social implications Policy implications: the adversative properties of bank mergers in respect of systemic risk require strict and innovative monitoring of bank mergers from the bidding level by both acquirers and targets and regulators and competition supervisory bodies. Moreover, emphasis on regulators/governments intervention and role, as it provides a stabilising factor of the markets and consecutively lower systemic risk even if the systematic idiosyncratic risk contribution was significant. However, such roles have to be well planned and scaled to avoid providing motives for banks to seek too-big-too-fail or too-big-to-discipline status. Originality/value This research contributes to the renewing regulatory debate on banks sustainable structures by examining the risk effect of bank diversification versus focus. The authors aim to address the multidimensional impacts and risks inherent to M&A deals, by examining the extent of the interconnectedness of M&A and its implications within and beyond the banking sector.

scholarly journals Systemic risk network of Chinese financial institutions

2018 ◽  
Vol 35 ◽  
pp. 190-206 ◽  
Author(s):  
Libing Fang ◽  
Boyang Sun ◽  
Huijing Li ◽  
Honghai Yu
Keyword(s):  
Financial Institutions ◽  
Systemic Risk

scholarly journals Would Hedge Fund Regulation Mitigate Systemic Risk? Direct vs. Indirect Regulation Approach

2017 ◽  
Vol 10 (8) ◽  
pp. 31
Author(s):  
Mehnaz Roushan Laura ◽  
Nafiz Ul Fahad
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Hedge Fund ◽  
Regulatory Change ◽  
Industry Growth ◽  
Large Complex ◽  
Fund Industry ◽  
Regulation Approach ◽  
The Waves ◽  
Regulatory Reforms

This paper presents the direct vs. indirect debate of hedge fund regulation and attempts to find which approach is better able to mitigate systemic risk that the industry poses to the economy. The waves of regulatory reforms and enhanced concern regarding investors protection have recently brought attention of the regulators to hedge fund regulation issue. But, many academics fear that direct intervention may limit industry growth and benefit. Addressing these concerns, this paper observes the systemic importance of hedge fund industry based on four criteria’s [size, leverage, interconnectedness to large complex financial institutions (LCFIs) and herding] and concludes that although this industry is still small in terms of size and leverage, their interconnectivity with LCFIs and potential herding make them systemically significant. Hence, regulation of hedge fund is necessary to restrict the transmission of systemic events. Analysing direct and indirect approaches, this paper suggests that the counterparties are best positioned to implement this regulatory change.

Systemic risk, financial markets, and performance of financial institutions

2016 ◽  
Vol 262 (2) ◽  
pp. 579-603 ◽  
Author(s):  
Edward M. H. Lin ◽  
Edward W. Sun ◽  
Min-Teh Yu
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Systemic Risk ◽  
And Performance

Part II United Kingdom, 9 Lessons of LBIE: Reuse and Rehypothecation

2017 ◽  
Author(s):  
Benjamin Joanna
Keyword(s):  
Risk Management ◽  
United Kingdom ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Free Fall ◽  
Shadow Banking ◽  
Profound Impact ◽  
Asset Protection ◽  
Lehman Brothers ◽  
The Uk

Two notable traumas followed the failure of Lehman Brothers on 15 September 2008. The first was the catastrophic delivering that affected wholesale financial institutions in 2009, as the post-LBIE markets went into free-fall. The second was the very long delays in the return of client assets held by in the UK Lehman Brothers International (Europe) (LBIE). The systemic failure has been associated with the reuse of securities collateral in general. Some have argued that the client asset delays were associated with a category of reuse, known as rehypothecation, in particular. Regulatory reforms have been introduced with a view to addressing both. However, this chapter argues that the true lesson of both failures is not yet fully reflected in regulation. This is the profound impact of shadow banking, and the reuse of securities collateral within it, upon client asset protection and systemic risk management alike.

The Impact of Sovereign Shocks

2020 ◽  
Vol 66 (7) ◽  
pp. 3113-3132
Author(s):  
Gerardo Manzo ◽  
Antonio Picca
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Dynamic Propagation ◽  
Novel Approach ◽  
Shock Transmission ◽  
The Impact

This paper studies the dynamic propagation mechanisms of systemic risk shocks within and across macrosystems of governments and financial institutions. We propose a novel approach to identify relevant systemic shocks and to classify them into sovereign or banking categories. We find that sovereign shocks have a significant and persistent impact on the probability of a collective banking default. We also explore channels through which these shocks propagate and identify how sovereign fiscal fragility and banking exposure are relevant mechanisms of shock transmission. This paper was accepted by Gustavo Manso, finance.

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