The Application of Macroprudential Capital Requirements in Managing Systemic Risk
Joint Authors
Fan, Hong
Keregero, Chirongo Moses
Gao, Qianqian
Source
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-15, 15 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-01-22
Country of Publication
Egypt
No. of Pages
15
Main Subjects
Abstract EN
When setting banks regulatory capital requirement based on their contribution to the overall risk of the banking system we need to consider that the risk of the banking system as well as each banks risk contribution changes once bank equity capital gets redistributed.
Therefore the present paper provides a theoretical framework to manage the systemic risk of the banking system in Nigeria based on macroprudential capital requirements, which requires banks to hold capital that is proportional to their contribution to systemic risk.
Using a sample of 10 Nigerian banks, we reallocate capital in the system based on two scenarios; firstly in the situation where the system shocks do not exist in the system, we find that almost all banks appear to hold more capital; secondly, we also consider the situation where the system shocks exist in the system; we find that almost all banks tend to hold little capital on four risk allocation mechanisms.
We further find that despite the heterogeneity in macroprudential capital requirements, all risk allocation mechanisms bring a substantial decrease in the systemic risk.
The risk allocation mechanism based on ΔCoVaR decreases the average default probability the most.
Our results suggest that financial stability can be substantially improved by implementing macroprudential regulations for the banking system.
American Psychological Association (APA)
Fan, Hong& Keregero, Chirongo Moses& Gao, Qianqian. 2018. The Application of Macroprudential Capital Requirements in Managing Systemic Risk. Complexity،Vol. 2018, no. 2018, pp.1-15.
https://search.emarefa.net/detail/BIM-1133921
Modern Language Association (MLA)
Fan, Hong…[et al.]. The Application of Macroprudential Capital Requirements in Managing Systemic Risk. Complexity No. 2018 (2018), pp.1-15.
https://search.emarefa.net/detail/BIM-1133921
American Medical Association (AMA)
Fan, Hong& Keregero, Chirongo Moses& Gao, Qianqian. The Application of Macroprudential Capital Requirements in Managing Systemic Risk. Complexity. 2018. Vol. 2018, no. 2018, pp.1-15.
https://search.emarefa.net/detail/BIM-1133921
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1133921