In this paper we propose a measure of systemic risk in the financial sector, the Expected Systemic Shortfall (ESS) indicator. The ESS-indicator is the product of the probability of a systemic default event and the expected tail loss in case this systemic event occurs. We compute the...

In this paper we propose a measure of systemic risk in the financial sector, the expected systemic shortfall (ESS) indicator. The ESS-indicator is the product of the probability of a systemic default event and the expected tail loss in case this systemic event occurs. We compute the indicator...

Consolidation has been a fact of life in the wholesale financial services sector, resulting in fundamental change in the financial architecture and public exposure to systemic risk. The underlying drivers include advances in transactions and information technologies, regulatory changes,...

This paper uses Bayesian model averaging (BMA) techniques to examine the driving factors of equity returns of U.S. financial institutions. The main advantage of BMA is accounting for model uncertainty. For the period 1986-2010, we fi nd that the most likely model explaining banking sector...

Deposit insurance can protect financially unsophisticated savers and prevent depositor runs, but it creates a need for regulation to control excessive risk-taking by insured banks. Several regulatory flaws were exposed by the 2008-2009 financial crisis. They include: risk-based capital standards...

We identify and track over time the factors that make the financial system vulnerable to fire sales by constructing an index of aggregate vulnerability. The index starts increasing quickly in 2004, before most other major systemic risk measures, and triples by 2008. The fire-sale-specific...

Exploiting staggered interstate banking deregulation as exogenous shocks to bank geographic expansion, we examine the causal effect of geographic diversification on systemic risk. Using the gravity-deregulation approach developed in Goetz, Laeven, and Levine (2013, 2016), we find that bank...

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...

I compare the performance of three measures of institution-level systemic risk exposure — Exposure CoVaR (Adrian and Brunnermeier, 2016), Systemic Expected Shortfall (Acharya, et al., 2016),and Granger Causality (Billio,etal.,2012). I modify Exposure CoVaR to allow for forecasting, and...

This paper examines whether the systemic risk of financial institutions is associated with the risk-taking incentives generated by executive compensation. We measure managerial risk-taking incentives with the sensitivities of chief executive officer (CEO) and chief financial officer (CFO)...