Risk Management

, Volume 21, Issue 4, pp 243–264 | Cite as

Systemic risk in financial institutions of BRICS: measurement and identification of firm-specific determinants

  • Shumaila ZebEmail author
  • Abdul Rashid
Original Article


The aim of this paper is twofold. First, it measures the systemic risk contribution of banks, financial services, and insurance firms of each of BRICS member country for the period 2000–2015. Second, it empirically examines how firm-specific factors determine systemic risk in financial institutions of BRICS countries. To carry out the empirical analysis, the unbalanced firm-level data are used. To gauge the systemic risk of banks, financial services, and insurance firms, the Delta Conditional Value-at-Risk (∆CoVaR) methodology is applied. The panel regression approach is used to examine how firm-specific variables determine the level of systemic risk in different financial institutions of BRICS countries. The empirical findings suggest that the size of institution, the tier 1 ratio, the liquidity ratio, the operating profit margin ratio, and the market-to-book value ratio statistically significantly determine systemic risk in BRICS countries. The results are significant in devising financial regulations to decrease the influence of systemic risk factors in the respective economies.


Systemic risk Value-at-risk Conditional value-at-risk Quantile regression Financial sector BRICS 

JEL Classification

G01 G21 G28 



  1. Acemoglu, D., A.Ozdaglar, and A. Tahbaz-Salehi. 2015. Systemic risk and stability in financial networks. American Economic Review 105 (2): 564–608.CrossRefGoogle Scholar
  2. Acharya, V.V., L.H. Pedersen, T. Philippon, and M. Richardson. 2017. Measuring systemic risk. The Review of Financial Studies 30 (1): 2–47.CrossRefGoogle Scholar
  3. Acharya, V., R. Engle, and D. Pierret. 2014. Testing macroprudential stress tests: The risk of regulatory risk weights. Journal of Monetary Economics 65: 36–53.CrossRefGoogle Scholar
  4. Adrian, T., and M.K. Brunnermeier. 2016. CoVaR. The American Economic Review 106 (7): 1705–1741.CrossRefGoogle Scholar
  5. Allen, F., and E. Carletti. 2013. What is systemic risk? Journal of Money, Credit and Banking, 45 (s1): 121–127.CrossRefGoogle Scholar
  6. Allen, F., E. Carletti, and R. Marquez. 2011. Credit market competition and capital regulation. Review of Financial Studies 24 (4): 983–1018.CrossRefGoogle Scholar
  7. Beltratti, A., and R.M. Stulz. 2012. The credit crisis around the globe: Why did some banks perform better? Journal of Financial Economics 105 (1): 1–17.CrossRefGoogle Scholar
  8. Berger, A.N., and C.H. Bouwman. 2013. How does capital affect bank performance during financial crises? Journal of Financial Economics 109 (1): 146–176.CrossRefGoogle Scholar
  9. Black, L.K., and L.N. Hazelwood. 2013. The effect of TARP on bank risk-taking. Journal of Financial Stability 9 (4): 790–803.CrossRefGoogle Scholar
  10. Bottazzi, G., De Sanctis, A., and F. Vanni. 2016. Non-performing loans, systemic risk and resilience in financial networks (No. 2016/08). Laboratory of Economics and Management (LEM), Sant’Anna School of Advanced Studies, Pisa, Italy.Google Scholar
  11. Brownlees, C.T., and R. Engle. 2012. Volatility, correlation and tails for systemic risk measurement. Available at SSRN, 1611229.Google Scholar
  12. Brunnermeier, M.K., A. Crockett, C.A. Goodhart, A. Persaud, and H.S. Shin. 2009. The fundamental principles of financial regulation, vol. 11. Geneva: ICMB, International Center for Monetary and Banking Studies.Google Scholar
  13. Brunnermeier, M.K., Dong, G.N., and D. Palia. 2012. Banks’ non-interest income and systemic risk.Google Scholar
  14. Cai, J., F. Eidam, A. Saunders, and S. Steffen. 2018. Syndication, interconnectedness, and systemic risk. Journal of Financial Stability 34: 105–120.CrossRefGoogle Scholar
  15. Caprio, G., L. Laeven, and R. Levine. 2007. Governance and bank valuation. Journal of Financial Intermediation 16 (4): 584–617.CrossRefGoogle Scholar
  16. De Jonghe, O., M. Diepstraten, and G. Schepens. 2015. Banks’ size, scope and systemic risk: What role for conflicts of interest? Journal of Banking & Finance 61: S3–S13.CrossRefGoogle Scholar
  17. Engle, R., E. Jondeau, and M. Rockinger. 2014. Systemic risk in Europe. Review of Finance 19 (1): 145–190.CrossRefGoogle Scholar
  18. Gropp, R., H. Hakenes, and I. Schnabel. 2011. Competition, risk-shifting, and public bail-out policies. Review of Financial Studies 24 (6): 2084–2120.CrossRefGoogle Scholar
  19. Haq, M., and R. Heaney. 2012. Factors determining European bank risk. Journal of International Financial Markets, Institutions and Money 22 (4): 696–718.CrossRefGoogle Scholar
  20. Kane, E.J., and H. Unal. 1990. Modeling structural and temporal variation in the market’s valuation of banking firms. The Journal of Finance 45 (1): 113–136.CrossRefGoogle Scholar
  21. Kleinow, J., and T. Nell. 2015. Determinants of systemically important banks: The case of Europe. Journal of Financial Economic Policy 7 (4): 446–476.CrossRefGoogle Scholar
  22. Kleinow, J., A. Horsch, and M. García Molina. 2014. Determinants of systemically important banks in latin america. 27th Australasian Finance and Banking Conference 2014 Paper.
  23. Kleinow, J., A. Horsch, and M. Garcia-Molina. 2017a. Factors driving systemic risk of banks in Latin America. Journal of Economics and Finance 41 (2): 211–234.CrossRefGoogle Scholar
  24. Kleinow, J., F. Moreira, S. Strobl, and S. Vähämaa. 2017b. Measuring systemic risk: A comparison of alternative market-based approaches. Finance Research Letters 21: 40–46.CrossRefGoogle Scholar
  25. Koenker, R., and G. Basset. 1978. Regression quantiles. Econometrica 46 (1): 33–50.CrossRefGoogle Scholar
  26. Laeven, L., and R. Levine. 2009. Bank governance, regulation and risk taking. Journal of financial economics 93 (2): 259–275.CrossRefGoogle Scholar
  27. Laeven, L., L. Ratnovski, and H. Tong. 2016. Bank size, capital, and systemic risk: Some international evidence. Journal of Banking & Finance 69: S25–S34.CrossRefGoogle Scholar
  28. Laeven, M.L., Ratnovski, L., and H. Tong. 2014. Bank size and systemic risk (No. 14). International Monetary Fund.Google Scholar
  29. Oh, D.H., and A.J. Patton. 2018. Time-varying systemic risk: Evidence from a dynamic copula model of cds spreads. Journal of Business & Economic Statistics 36: 181–195.CrossRefGoogle Scholar
  30. Perotti, E.C., and J. Suarez. 2011. A Pigovian approach to liquidity regulation.Google Scholar
  31. Varotto, S., and L. Zhao. 2014. Systemic risk in the US and European Banking Sectors. Working Paper ICMA Centre, Reading.Google Scholar
  32. Vuković, V., and I. Domazet. 2013. Non-performing loans and systemic risk: Comparative analysis of Serbia and countries in transition CESEE. Industrija 41 (4): 59–73.CrossRefGoogle Scholar
  33. Weiß, G.N., D. Bostandzic, and S. Neumann. 2014. What factors drive systemic risk during international financial crises? Journal of Banking & Finance 41: 78–96.CrossRefGoogle Scholar

Copyright information

© Springer Nature Limited 2019

Authors and Affiliations

  1. 1.Shaheed Zulfikar Ali Bhutto Institute of Science and TechnologyIslamabadPakistan
  2. 2.International Institute of Islamic EconomicsInternational Islamic UniversityIslamabadPakistan

Personalised recommendations