Identifying the systemically important banks of Turkey with the CoVaR method

Abstract

The purpose of this paper is to measure the systemic risk contributions of Turkish banks and to identify the systemically important banks of Turkey during the period from 2005 to 2016. We apply the conditional value-at-risk (CoVaR) method proposed by Adrian and Brunnermeier (2009) using quantile regression. The study includes thirteen major banks of Turkey, including both public and private banks, out of a total of 52 banks. The banks are ranked in terms of their systemic risk contribution to the Turkish financial system based on their asset returns, macroeconomic variables and individual bank variables. The study reveals that Akbank, Garanti, Yapi Kredi and Isbank have the highest systemic risk contribution to the financial system when adding macroeconomic variables to the model. This ranking is changed to Yapi Kredi, Garanti, TEB, Sekerbank and Akbank when taking into account bank-specific variables. One surprising result is that risk in isolation and the spillover risks of public banks are smaller than in large private banks. Furthermore, the marginal systemic risk contributions of public banks are smaller than those of private banks. In conclusion, authorities improve the regulatory framework according to the context of CoVaR in addition to monitor the idiosyncratic risks of banks.

What Are the Macroeconomic Drivers of the Asset Returns of Turkish Banks?

“…In this regard, when it is reviewed the empirical results from systemic risk perspective, the bist100 and the exchange rate impact on the returns of the market valued of the Turkish banks total assets. Thus, the stock market index and the exchange rate as the indicators of the Turkish financial market contribute to the systemic risk of the Turkish banks, consistent with the results of Binici et al (2013) and Civan et al (2020), and the study of Pavlova and Rigobon (2007). They reveal the importance of the foreign exchange market as a spillover tool.…”

“…Dagidir (2010) identify interest rate as a proxy for the bank profitability and finds a negative linkage between interest rate and inflation, see also Muradoglu et al (2000), Aysan and Ceyhan (2008), Baltaci (2014), Akbas (2012) and Ayaydin and Karaaslan (2014). On the other hand, there are few studies that focus on examining the impact of macroeconomic indicators on bank stock returns, such as Altay (2005), Kucukkocaoglu et al (2013), Pekkurnaz and Elitas (2015), and Civan et al (2020).…”

“…where i t A indicates the market value of a bank's total assets in terms of the 2 nd session closing share prices of the bank, Moreover, TEB has no stock prices since June 2015 because of willingly unsubscribing from the Turkish stock market. The asset returns of these missing share price quotations were obtained with the assistance of using a banking sector index in the Borsa Istanbul Inc., namely XBANK, by following the method described in the study of Civan et al (2020).…”

Understanding Systemic Risk Dynamics and Economic Growth: Evidence from the Turkish Banking System

“…Ref. [43] measured the Turkish banks' systemic risk contributions and identified the systemically significant Turkish banks between 2005 and 2016 by applying the CoVaR method. The banks analyzed in the study were for which Ziraat, Halkbank, Vakıfbank, ˙Işbank, Akbank, Garanti, Yapıkredi, Denizbank, Finansbank, TEB, Şekerbank, TSKB, and Kalkınma Bankası.…”

Gaussian Bayesian network model of healthcare, food and energy sectors in the pandemic: Türkiye case

“…Some studies analyze sectoral stock market indicators using classical methods. For example, the conditional value-at-risk (CoVaR) method [ 5 ] is used to determine the influential banks in evaluating the contribution of 52 banks and their subsidiaries operating in the Turkish financial sector to risk diversification and systematic risk between 2005 and 2016 [ 6 ].…”