Michal Skořepa, Jakub Seidler
This article is concerned with the regulation of banks on the basis of their different degrees of systemic importance. It proposes a specific approach to calculating a bank’s systemic importance to the domestic banking sector. The article goes on to propose a method for assessing the additional capital requirement for a bank based on the estimated cost impacts of failure of the bank on the Czech financial sector and the economy as a whole. The proposed approach is used to obtain systemic importance scores and capital buffers for individual banks in the Czech Republic. According to the calculations, the highest capital buffer is 4%. However, a non-zero capital buffer should not be interpreted as a signal that the bank is too big to fail and would therefore be guaranteed a public bail-out if it got into difficulties.
Issued: June 2013
Download: Thematic article in the Financial Stability Report 2012/2013 (pdf, 252 kB)