Bank Size, Capital, and Systemic Risk: Some International Evidence

35 Pages Posted: 13 Oct 2014

See all articles by Luc Laeven

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Lev Ratnovski

International Monetary Fund; European Central Bank, Financial Research Division

Hui Tong

International Monetary Fund (IMF)

Date Written: September 16, 2014

Abstract

This paper studies the significant variation in the cross-section of standalone and systemic risk of large banks during the recent financial crisis to identify bank specific factors that determine risk. We find that systemic risk grows with bank size and is inversely related to bank capital, and this effect exists above and beyond the effect of bank size and capital on standalone bank risk. Our results contribute to the ongoing debate on the merits of imposing systemic risk-based capital requirements on banks.

Keywords: Banking crisis; Bank performance; Bank fragility; Systemic risk; Financial regulation

JEL Classification: G01, G21, G28

Suggested Citation

Laeven, Luc A. and Ratnovski, Lev and Tong, Hui, Bank Size, Capital, and Systemic Risk: Some International Evidence (September 16, 2014). Available at SSRN: https://ssrn.com/abstract=2508910 or http://dx.doi.org/10.2139/ssrn.2508910

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lev Ratnovski

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://ratnovski.googlepages.com

European Central Bank, Financial Research Division

Germany

Hui Tong

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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