Bank, systemic, sometimes also systemically important and, according to the English-language term, also often Sifi and SIB in German (systemic bank, system-relevant bank, systematically important financial institution, Sifi)
In the course of the subprime crisis, this term became generally known for an institution that – is of a certain size, – is interwoven into the financial markets worldwide, and – can hardly be replaced. If such a bank becomes insolvent, this has far-reaching effects on the global financial system as a whole. This was demonstrated in mid-September 2008, when the North American bank Lehman Brothers collapsed and the subprime crisis turned into a global financial crisis. – To date, there is still a lack of generally accepted methods for precisely measuring systemic risk for individual institutions. However, it is undisputed that – globally branched – large banks have, at least in the past, been more exposed to systemic risks than, for example, deposit-financed savings banks or Volksbanks. The supervisory authorities therefore demand that these institutions also hold more equity or be allowed to take on less debt. – As a matter of principle, it must be avoided that institutions deliberately strive for size and interconnectedness, then take high risks in the awareness of being „too connected to fail“ and rely on the state bail-out in the event of a failure. The fact is, however, that the creditors of a systemic bank (Sifi) are well aware that they enjoy an indirect guarantee from the state. This acts like a subsidy, so to speak. It sets false incentives and leads to strong distortions in the financial sector. – For its part, the systemic bank is able to refinance itself more cheaply on the capital market thanks to the unspoken inherent state guarantee and thus has lower interest costs compared with competitors. This, in turn, can translate into billions of euros annually for just one Sifi. – See resolvability, bail-out, bank, national systemic, bank operating size, optimal, banking supervision, European, financial institution, global, financial market-
Interdependence, financial stability, big bank, size confidence, G-sifi, money-matters theorem, moral hazard, mandatory convertible bond, restructuring management, risk shield law, role mix, banking, debt bomb, sifi oligopoly, stability fund, European, systemic relevance, too big to fail principle, insurance company, systemically important…. – See BaFin’s 2011 Annual Report, pp. 50 ff. (detailed report on international efforts to identify and regulate sifis), Financial Stability Report 2012, p. 98 (continuing dangers posed by the collapse of globally interconnected institutions), Deutsche Bundesbank’s 2012 Annual Report, pp. 95 f. (framework for dealing with sifis), ECB’s 2012 Annual Report, p. 133 (framework; identification issues; relevance levels [buckets]), BaFin Annual Report 2012, pp. 9 ff. (principles for dealing with systemic banks), pp. 45 f. (more sustainable supervision), BaFin Annual Report 2013, pp. 27 ff. (definitional issues), pp. 75 f. (principles for an effective risk appetite framework are intended to limit excessive risk-taking).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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