TY - JOUR

T1 - The Contribution of Large Banking Institutions to Systemic Risk

T2 - What Do We Know? A Literature Review

AU - Moch, Nils

PY - 2018/12/1

Y1 - 2018/12/1

N2 - Against the background of the global financial crisis, we review recent literature on the debate about "too big to fail". This is (still) one of the key issues in banking literature since it determines the conditions for adequate banking regulation, financial stability and economic welfare. Analyzing 30 papers from 2009 to 2017, our work focusses on the impact of large banks on systemic risk. Large financial institutions can affect systemic risk by either contributing to systemic risk or being extremely exposed to sources of systematic risk and contagion. We find a considerable number of theoretical and empirical studies providing evidence that against the background of the constitution of present-day real financial systems, bank size is a key predictor for systemic risk and that the largest banks disproportionately contribute to overall risk. This relationship is found in samples of different composition, for various periods and with different measures covering diverse aspects of systemic risk.

AB - Against the background of the global financial crisis, we review recent literature on the debate about "too big to fail". This is (still) one of the key issues in banking literature since it determines the conditions for adequate banking regulation, financial stability and economic welfare. Analyzing 30 papers from 2009 to 2017, our work focusses on the impact of large banks on systemic risk. Large financial institutions can affect systemic risk by either contributing to systemic risk or being extremely exposed to sources of systematic risk and contagion. We find a considerable number of theoretical and empirical studies providing evidence that against the background of the constitution of present-day real financial systems, bank size is a key predictor for systemic risk and that the largest banks disproportionately contribute to overall risk. This relationship is found in samples of different composition, for various periods and with different measures covering diverse aspects of systemic risk.

KW - bank bailouts

KW - banking crises

KW - financial stability

KW - systemic risk

KW - too big to fail

KW - Management studies

UR - http://www.scopus.com/inward/record.url?scp=85058407923&partnerID=8YFLogxK

U2 - 10.1515/roe-2018-0011

DO - 10.1515/roe-2018-0011

M3 - Journal articles

AN - SCOPUS:85058407923

VL - 69

SP - 231

EP - 257

JO - Review of Economics

JF - Review of Economics

SN - 0948-5139

IS - 3

ER -