A Systemic Importance Score for Identifying Systemically Important Banks

After the recent global financial crisis, great focus has been raised on the identification of systemically important banks. Therefore, simple and intuitive indicators on banks' systemic importance are urgently needed. This paper provides a new estimation method to measure and identify systemically important banks. We define quantitatively a systemic importance score (SIS) as the expected number of bank failures in the banking system given one particular bank fails. The SIS concentrates mainly on an existence of a contagion effect in an average meaning. In the empirical analysis, the SIS index is applied to identify the systemically important banks of China. The empirical results demonstrate that the big five state-owned banks are systemically important banks. Besides, IB, SPDB and CMB are also perceived as systemically important. (C) 2015 Published by Elsevier B.V.