On Identifying the Systemically Important Tunisian Banks: An Empirical Approach Based on the △CoVaR Measures

Wided Khiari,Salim Ben Sassi

doi:10.3390/risks7040122

Wided Khiari, Salim Ben Sassi

Open Access

https://doi.org/10.3390/risks7040122

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Abstract

The aim of this work is to assess systemic risk of Tunisian listed banks. The goal is to identify the institutions that contribute the most to systemic risk and that are most exposed to it. We use the CoVaR that considered the systemic risk as the value at risk (VaR) of a financial institution conditioned on the VaR of another institution. Thus, if the CoVaR increases with respect to the VaR, the spillover risk also increases among the institutions. The difference between these measurements is termed △CoVaR, and it allows for estimating the exposure and contribution of each bank to systemic risk. Results allow classifying Tunisian banks in terms of systemic risk involvement. They show that public banks occupy the top places, followed by the two largest private banks in Tunisia. These five banks are the main systemic players in the Tunisian banking sector. It seems that they are the least sensitive to the financial difficulties of existing banks and the most important contributors to the distress of the other banks. This work aims to add a broader perspective to the micro prudential application of regulation, including contagion, proposing a macro prudential vision and strengthening of regulatory policy. Supervisors could impose close supervision for institutions considered as potentially systemic banks. Furthermore, regulations should consider the systemic contribution when defining risk requirements to minimize the consequences of possible herd behavior.

Highlights

Ever since the genesis of the discipline, the quest for comprehending and measuring risk has been of paramount importance among academics
Some Chinese scholars use conditional value risk (CoVaR) of the introduction of state variables to make an empirical analysis for the systemic risk in 14 Chinese listed banks, and the results show that there is significant systemic risk spillover in the listed commercial banks of China; some use the method CoVaR to measure the systemic risk of the banking industry, and put forward the corresponding suggestions for risk supervision; some have adopted the method component expected shortfall (CES) to measure the systematic risk of the 14 listed Chinese banks and have investigated the relationship between income of non interest and systemic risk; and others use the quantile regression model of risk spillover effect to calculate and compare the CoVaR
It should be noted that Banque de l’Habitat (BH) and BTE are the most involved banks, as they are located furthest to the left. According to this map the BTE and BH are substantially involved in systemic risk as they represent the important ∆CoVaR sys/i and ∆CoVaRq i/system measures

Summary

Introduction

Ever since the genesis of the discipline, the quest for comprehending and measuring risk has been of paramount importance among academics. In light of the large number of crises that have occurred in recent years, greater emphasis has been placed on understanding and managing the systemic risk measure. While this multidimensional concept is widely discussed in an increasing number of papers, there is still no consensus on a unique definition of systemic risk. Africa (MENA) region, economically and humanely, in the run-up to the 2011 revolution. It was one of the first countries in the region to implement a set of early structural reforms, contributing to the success of the economy in the mid-1990s.

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