Why do U.S. banks contribute more to global systemic risk
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Date
2013-10-02
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Abstract
We show that U.S. banks are more exposed and contribute more to systemic risk in the global
financial system than European banks. We find that banks become systemically relevant if they
rely too strongly on non-interest income, less traditional lending and if the quality of their loan
portfolio decreases. More stringent capital regulations and more independent supervisory agencies
improve financial stability. As we match European and U.S. banks based on firm size and valuation,
the differences we find in the banks’ systemic relevance cannot be explained by the too-big-to-fail
or charter value hypotheses.
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Keywords
bank regulation, capital regulation, financial crises, non-interest income, systemic risk