34 Pages Posted: 29 Jan 2012 Last revised: 27 Mar 2013
Date Written: March 25, 2013
This paper empirically analyzes the determinants of banks' systemic importance. In constructing a measure on the systemic importance of financial institutions we find that size is a leading determinant. This confirms the usual "Too big to fail" argument. Nevertheless, banks with size above a sufficiently high level have equal systemic importance. In addition to size, we find that the extent to which banks engage in non-traditional banking activities is also positively related to banks' systemic importance. Therefore, in addition to "Too big to fail", systemically important financial institutions can also be identified by a "Too non-traditional to fail" principle.
Keywords: too big to fail, too connected to fail, determinants of systemic importance, systemically important financial institution, systemic risk, systemic importance, multivariate extreme value theory
JEL Classification: G01, G21, G28
Suggested Citation: Suggested Citation
Moore, Kyle and Zhou, Chen, 'Too Big to Fail' or 'Too Non-Traditional to Fail'?: The Determinants of Banks' Systemic Importance (March 25, 2013). Available at SSRN: https://ssrn.com/abstract=1993059 or http://dx.doi.org/10.2139/ssrn.1993059