Bank Distress and Tail Risk

Tail risk and systemic risk of finance and technology (FinTech) firms

“…Banks with lower equity capital, higher loan loss provision, and more exposure to real estate loans have significantly greater levels of idiosyncratic risk. By using accounting, market and macroeconomic data of the US bank holding firms to assess the relationship between tail risk and financial distress risk, Alzugaiby et al (2019) find a significant positive relationship between banks' tail risks and their risk of financial distress. This implies that financial distress is more likely to happen with banks that have more frequent extreme negative daily equity returns.…”