Identifying SIFIs and SINFIs: New Perspectives in Measuring Systemic Risk

Abstract

This paper analyses the systemic risk in an emerging market context, with two innovations. It uses the average of the percentile ranking of three widely used measures of systemic risk of a firm to calculate a single systemic risk index (SRI) for the firm. It then uses the SRI to identify systemically important financial institutions (SIFIs) and non-financial institutions (SINFIs) among 50 largest Indian firms, in each quarter from 2000 to 2012. The paper finds that the SRI tracks the changes in systemic risk in India during the 2008 crisis. The paper also shows that there is merit in monitoring the SRI of SINFIs, particularly when bank loan portfolios have concentrated exposures in such firms.

Keywords: Systemic risk, Systemically important financial institutions, Systemic risk index

JEL Classification: G01, G10, G28, G29