Measuring Systemic Risk Potential Across Banks in Asia

Posted: 28 Mar 2015

See all articles by Jones Odei Mensah

Jones Odei Mensah

Wits Business School

Gamini Premaratne

University of Illinois at Urbana-Champaign - Department of Economics; University of Brunei Darussalam

Date Written: November 30, 2014

Abstract

The unusual severity of the recent global financial crisis has drawn much attention to systemic risk, particularly its measurement, and the institutions that contribute most to it. This paper provides an empirical examination of the systemic risk potential among banking institutions in Asia using CoVaR and Granger causality network approaches. The empirical evidence for a potential systemic crisis among Asia banks is ambiguous. The analysis reveals that the degree of interconnectedness has general gone up among banks in Asia. Nevertheless, the causal network among the banks has become less dense after the global financial crisis in 2007-2009. Banks from developed Asia economies generally rank higher compared to those from emerging market counterparts. Finally, we find that the greatest contributors to systemic risk are not necessarily large banks.

Keywords: Systemic Risk, Asia Banking Market, CoVaR, Granger causality network

JEL Classification: G01, G20, G21

Suggested Citation

Mensah, Jones Odei and Premaratne, Gamini and Premaratne, Gamini, Measuring Systemic Risk Potential Across Banks in Asia (November 30, 2014). Available at SSRN: https://ssrn.com/abstract=2585890 or http://dx.doi.org/10.2139/ssrn.2585890

Jones Odei Mensah (Contact Author)

Wits Business School ( email )

Johannesburg
South Africa

Gamini Premaratne

University of Brunei Darussalam ( email )

Jalan Tungku Link
Gadong, BE1410
Brunei

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

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