Study of prerequisites for the formation of systematically important banks in regional economic associations

Despite the fact that more than ten years have passed since the rules for domestic systemically important banks (D-SIBs) were developed, the issues of identification of systemically important banks (SIB) and their regulation remain relevant today. Of particular interest is the possibility of forming uniform criteria for identifying systemically important banks within the framework of regional economic associations. The study is aimed at studying the prerequisites and fundamental possibilities of creating common criteria for classifying banks of the participating countries (Kazakhstan, Belarus, Russia) as SIB at the level of the Eurasian Economic Union (EAEU) through a clusterization approach. Clustering methodologies using Euclidean distance metrics and the Hamming model allowed for an initial study on the potential of the participating countries to develop common criteria for the SIB of the EAEU Union. The results of the analysis showed that the participating countries have the potential and some prerequisites for the development of common criteria within the union. However, it was found that the systemically important banks of the participating countries often change the level, since the criteria are not stable. Therefore, when forming uniform criteria, this point should be taken into account and criteria should be developed that are not approximated with each other, and similar features are significantly distinctive. The study consists of two parts, this work is the first part.

1. Evrazijskij jekonomicheskij sojuz v cifrah. Kratkij statisticheskij sbornik za 2021 god. URL: https://eec.eaeunion.org/comission/department/dep_stat/union_stat/. (In Russian).

2. Global systemically important banks: assessment methodology and the additional loss absorbency requirement // Basel Committee on Banking Supervision. November 2011. URL: https://www.bis.org/publ/bcbs207.pdf. (In English).

3. A framework for dealing with domestic systemically important banks // Basel Committee on Banking Supervision. October 2012. URL: https://www.bis.org/publ/bcbs233.pdf. (In English).

4. Pravila otnesenija finansovyh organizacij k chislu sistemno znachimyh. Utverzhdeny Postanovleniem Pravlenija Nacional'nogo Banka Respubliki Kazahstan ot 23 dekabrja 2019 goda No. 240. URL: https://www.nationalbank.kz. (In Russian).

5. Instrukcija o porjadke opredelenija sistemno znachimyh bankov, nebankovskih kreditno-finansovyh organizacij. Utverzhdena Postanovleniem Pravlenija Nacional'nogo Banka Respubliki Belarus' ot 18 maja 2017 goda № 180. URL: https://www.nbrb.by/. (In Russian).

6. O metodike opredelenija sistemno znachimyh kreditnyh organizacij. Utverzhdena Ukazaniem Central'nogo Banka Rossijskoj Federacii ot 13 aprelja 2021 goda № 5778-U. URL: https://www.cbr.ru/. (In Russian).

7. Saunders A., Strock E., Travlos N.G. (1990) Ownership structure, deregulation, and bank risk taking // The Journal of Finance. vol. 45, no. 2, pp. 643–654. (In English).

8. Acharya V.V., Yorulmazer T. (2007) Too many to fail – An analysis of time-inconsistency in bank closure policies // Journal of financial intermediation, vol. 16(1), pp. 1–31. (In English).

9. Elsinger H., Lehar A., Summer M. (2006) Risk assessment for banking systems // Management science, vol. 52, no. 9, pp. 1301–1314. (In English).

10. Angeloni I., Faia E. (2013) Capital regulation and monetary policy with fragile banks // Journal of Monetary Economics, vol. 60(3), pp. 311–324. (In English).

11. Rubio M., Carrasco-Gallego J.A. (2016) The new financial regulation in Basel III and monetary policy: A macroprudential approach // Journal of Financial Stability, vol. 26, pp. 294–305. (In English).

12. Tayler W.J., Zilberman R. (2016) Macroprudential regulation, credit spreads and the role of monetary policy // Journal of Financial Stability, vol. 26, pp. 144–158. (In English).

13. Bongini P., Nieri L., Pelagatti M. (2015) The importance of being systemically important financial institutions // Journal of Banking & Finance. Vol. 50. P. 562–574. (In English).

14. Hmissi B., Bejaoui A., Snoussi W. (2017) On identifying the domestic systemically important banks: The case of Tunisia // Research in International Business and Finance. Vol. 42. P. 1343–1354. (In English).

15. Brechler J. et al. (2014) Similarity and clustering of banks: Application to the credit exposures of the Czech banking sector // Czech National Bank. No. 4. (In English).

16. Alessandri P., Masciantonio S., Zaghini A. (2015) Tracking banks’ systemic importance before and after the crisis // International Finance. Vol. 18. No. 2. P. 157–186. (In English).