Abstract
Systemic Importance of Financial Institutions: Evidence from Asian Countries
Highlights
Global Financial Crisis (GFC) of 2007-08 exposed the weaknesses of prevailing financial system and showed how failure of large institutions can lead to disastrous consequences for the entire financial system and economy at large
In banking sector of Pakistan, no bank has been identified as G-SIB; from the results we have found that few banks have domestic systemic importance; failure of these banks can damage economy of the country
While in Pakistan insurance sector is dominated by State Life Insurance Corporation of Pakistan which has scored 7040, making it the most and the only systemically important financial institution in domestic context
Summary
Global Financial Crisis (GFC) of 2007-08 exposed the weaknesses of prevailing financial system and showed how failure of large institutions can lead to disastrous consequences for the entire financial system and economy at large. Studies conducted after crisis like Murphy, Dell'Ariccia, and Darolles and Dubecq showed that certain financial institutions are so central to the financial system that their failure can cause shocking damage, both to financial markets and to the economy at large [2-4]. These institutions (too big to fail) are often referred to as “Systemically Important Financial Institutions”. Recent crisis showed that prices of products offered by Insurance companies e.g. insurance premiums increase dramatically after global financial crisis, this supply shock extended beyond insurance sector and as a result create a ripple effect [5]
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