The Influence of Economic Factors on the Capital Buffer Calibration for Systemically Important Institutions in the European Union

35 Pages Posted: 30 Mar 2021 Last revised: 21 Oct 2021

See all articles by Hans-Peter Burghof

Hans-Peter Burghof

University of Hohenheim

Julia Juric

University of Hohenheim

Daniel Schmidt

University of Hohenheim

Date Written: October 20, 2021

Abstract

Capital requirements are key elements in banking regulation. As the failure of a systemically important institution poses a risk to the whole economy, they have to meet special regulations. Our research uses a unique data set to show the influence of economic factors on the capital buffer calibration for Other Systemically Important Institutions (O-SIIs). We show that the scoring process to identify and rank O-SIIs is comparable in the different countries of the EU, but the respective equity requirements are not. Nations with higher unemployment and a higher amount of non-performing loans demand less capital from their banks. Hence, their country average of capital buffer requirements per score depends on the economic situation rather than the scoring process as such.

Keywords: banking regulation, systemically important institutions, equity buffer, economic influence on regulation, buffer calibration

JEL Classification: E5, E58, G21, G18, G28

Suggested Citation

Burghof, Hans-Peter and Juric, Julia and Schmidt, Daniel, The Influence of Economic Factors on the Capital Buffer Calibration for Systemically Important Institutions in the European Union (October 20, 2021). Available at SSRN: https://ssrn.com/abstract=3815142 or http://dx.doi.org/10.2139/ssrn.3815142

Hans-Peter Burghof

University of Hohenheim ( email )

Schloss Hohenheim
510F
Stuttgart, 70599
Germany
+49 711 459 22900 (Phone)
+49 711 459 23448 (Fax)

Julia Juric

University of Hohenheim ( email )

Germany
071145922756 (Phone)

HOME PAGE: http://bank.uni-hohenheim.de/

Daniel Schmidt (Contact Author)

University of Hohenheim ( email )

Germany
004971145922756 (Phone)
004971145923448 (Fax)

HOME PAGE: http://https://bank.uni-hohenheim.de/

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