Journal of Financial Services Research

, Volume 42, Issue 1–2, pp 55–83 | Cite as

Systemic Risk Contributions

  • Xin Huang
  • Hao Zhou
  • Haibin Zhu


We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks’ marginal contributions to the systemic risk. The methodology is applied using publicly available data to the 19 bank holding companies covered by the U.S. Supervisory Capital Assessment Program (SCAP), with the systemic risk indicator peaking around $1.1 trillion in March 2009. Our systemic risk contribution measure shows interesting similarity to and divergence from the SCAP loss estimates under stress test scenarios. In general, we find that a bank’s contribution to the systemic risk is roughly linear in its default probability but highly nonlinear with respect to institution size and asset correlation.


Distress insurance premium Systemic risk Macroprudential regulation Large complex financial institution Too-big-to-fail Too-connected-to-fail 

JEL Classification

G21 G28 G14 



We would like to thank Viral Acharya, Tobias Adrian, Sean Campbell, Myron Kwast, Frank Packer, Nikola Tarashev, James Wilcox, Robert DeYoung, and seminar participants at the Federal Reserve, Chicago Bank Structure Conference, IMF Conference on Operationalizing Systemic Risk Monitoring, Fields Institute Financial Stability Forum, NUS Risk Management Conference, Bank of England, Reserve Bank of New Zealand and CAREFIN (Centre for Applied Research in Finance, University of Bocconi) Conference on Matching Stability and Performance, 10th Annual Bank Research Conference at FDIC, Rice University, Bank of Korea and BIS Conference on Macroprudential Regulation and Policy in Seoul, University of International Business and Economics in Beijing, Hong Kong University of Science and Technology, and Deutsche Bundesbank Conference on Basel III and Beyond: Regulating and Supervising Banks in the Post-Crisis Era for their helpful commments. James Marrone provided excellent research assistance. We also thank Christopher Karlsten for editing assistance. The paper was prepared when Haibin Zhu was a research economist at the Bank for International Settlements. The views presented here are solely those of the authors and do not necessarily represent those of the Federal Reserve Board, the Bank for International Settlements, J.P. Morgan Chase Bank, or their staff.


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of OklahomaNormanUSA
  2. 2.Risk Analysis Section, Federal Reserve BoardWashingtonUSA
  3. 3.J.P. Morgan Chase Bank, N.A.Hong KongChina

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