Pitfalls in Systemic-Risk Scoring

81 Pages Posted: 28 Sep 2013 Last revised: 9 Feb 2018

See all articles by Sylvain Benoit

Sylvain Benoit

Université Paris Dauphine - LEDa-SDFi

Christophe Hurlin

University of Orleans

Christophe Perignon

HEC Paris - Finance Department

Date Written: February 8, 2018

Abstract

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.

Keywords: G-SIFI, regulatory capital, Basel Committee

JEL Classification: G21

Suggested Citation

Benoit, Sylvain and Hurlin, Christophe and Perignon, Christophe, Pitfalls in Systemic-Risk Scoring (February 8, 2018). HEC Paris Research Paper No. FIN-2013-1005. Available at SSRN: https://ssrn.com/abstract=2332030 or http://dx.doi.org/10.2139/ssrn.2332030

Sylvain Benoit

Université Paris Dauphine - LEDa-SDFi ( email )

Place du Maréchal de Lattre de Tassigny
Paris, Cedex 16 75775
France

Christophe Hurlin

University of Orleans ( email )

Université d'Orléans
Rue de Blois B.P. 6739 45
France

Christophe Perignon (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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