Bank Size and Systemic Risk

23 Pages Posted: 5 Jun 2013

See all articles by Amelia Pais

Amelia Pais

Massey University - Department of Commerce

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: June 2013

Abstract

The global financial crisis that started in mid‐2007 illustrates the relevance of systemic risk. One key driver of the systemic instability that materialised in the crisis was the elevated level of stress in large banks. We use EVT to analyse the effect of size on banks’ univariate and systemic risk across ten countries as well as across the EU. Our findings show that size has little impact on banks’ univariate risk (as measured by VaR), but that large banks have significantly higher systemic risk. Furthermore, systemic risk has significantly increased for banks of all sizes since the beginning of the crisis.

Keywords: systemic risk, banks, Extreme Value Theory, too big to fail

Suggested Citation

Pais, Amelia and Stork, Philip A., Bank Size and Systemic Risk (June 2013). European Financial Management, Vol. 19, Issue 3, pp. 429-451, 2013, Available at SSRN: https://ssrn.com/abstract=2274562 or http://dx.doi.org/10.1111/j.1468-036X.2010.00603.x

Amelia Pais (Contact Author)

Massey University - Department of Commerce ( email )

Private Bag 102-904
Auckland
New Zealand

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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