Identification of global systemically important stock exchanges

Abstract

Research background: Increased regulations reducing systemic risk are essentially underpinned by the understanding of the global nature and sources of instability of the financial system. In the economic literature, there are many arguments presented by critical supporters and opponents of measuring and reporting global systemically important entities.
 Purpose of the article: In response to the requirements of regulators, the article seeks to identify systematically important regulated stock markets for selected global stock exchanges by developing a composite ratio. Additionally, it provides empirical evidence concerning their risk exploration.
 Methods: The proposed method uses weighted average values of indicators grouped in four categories: (1) market size, (2) cross-jurisdictional activity and interconnectedness, (3) substitutability, (4) complexity. The research covers stock exchanges, reported to WFE, spanning the period 2008–2017.
 Findings & Value added: The study finds that the problem of systemic risk on global stock exchanges is growing despite numerous prudential regulations. In order to obtain a more complete assessment of market systemic sensitivity, regulators should take into account a wider range of indicators and calculations such as cross-jurisdictional activity and market complexity.

Trust crisis in the financial sector and macroeconomic stability: a structural equation modelling approach

“…The selection of indicators to assess the financial sector development was made based on its institutional structure from the financial intermediation perspective. Financial sector development, in agreement with earlier studies such as Duhnea et al (2017), Karkowska and Kravchuk (2019), Leonov et al (2012Leonov et al ( , 2014, Skare and Porada-Rocho n (2019), Skvarciany et al 2019, Vukovic et al (2017) was measured using the ratio of bank assets to GDP, the ratio of non-bank financial institutions assets to GDP, the ratio of securities trading to GDP that characterises the size of banking and non-banking financial and credit systems, as well as activity in the stock market. In general, according to the confirmatory factor analysis, the proposed indicators allow 72% to determine the financial sector development within the context of financial intermediation in the country.…”

Readiness for implementing innovations in banking in advanced and emerging economies

“…The increased volatility in global commodity and financial markets (Przekota et al, 2019), uncertainty of the world economic outlook (Karkowska and Kravchuk, 2019;Korzeb & Niedziółka, 2020), devaluation of the national currency, macroeconomic imbalances (Correia & Martins, 2019;Biegun & Karwowski, 2020), new threats related to personal data protection (Lăzăroiu et al, 2018), increase in cybercrime (Afonasova et al, 2019), and excessive riskiness and speculative nature of banking operations in systemically important banks and contribute to potential increase in credit, liquidity and operational risks due to the interconnection of financial system participants and economic entities. To mitigate these risks, central banks are prompted to strengthen the regulatory standards and macroprudential norms (Mikhaylova et al, 2019;Lăzăroiu et al, 2018).…”