Measuring Systemic Risks in the Turkish Banking Sector

Abstract

This paper focused on measuring the systemic risks in Turkey's banking sector by using two major measures that have been proposed in the literature as conditional value at risk (CoVaR) and marginal expected shortfall (MES). In order to compute the contribution of banking sector to systemic risks, the MES and ΔCoVaR measures are estimated for the six Turkish banks, which are listed, on the Borsa Istanbul (BIST) during 2000-2016 period by using Engle's dynamic conditional correlation model. The preliminary results of this study show that although the measures provide different rankings for the systemic risk contributions, they turn out to be qualitatively very similar in explaining the cross-sectional differences in systemic risk contributions. Secondly, both systemic risk measures (MES and ΔCoVaR) are analyzed to determine the relationships between some variables associated with bank characteristics (e.g., VaR, size and leverage ratio) and banks' systemic risk contributions, via simple panel data regression methods.

Identifying the systemically important banks of Turkey with the CoVaR method

“…In our study, we also find that Yapi Kredi, Akbank, Garanti, Isbank and TEB are identified as the most systemically important banks. Sengul and Yilmaz (2019) who ranked six Turkish banks based on their stock returns by using the CoVaR and MES methods. Finansbank, ICBC Turkey Bank, Yapi Kredi, Akbank, Garanti and Isbank were ranked according to their systemic risk contribution in descending order.…”

“…Akkoyun et al (2013) measure the systemic importance of eight Turkish banks with contingent claims analysis and Shapley value without giving a name. Sengul and Yilmaz (2019) investigate the systemic risk of the Turkish banking sector by using CoVaR and marginal expected shortfall. The data includes six Turkish banks during 2000-2016 and included macroeconomic and financial market variables.…”

“…Aydin and Cavdar (2015) investigate the relationship between the exchange rate of US Dollar-Turkish Lira (USD/TRY), gold prices and the Borsa Istanbul (BIST) 100 index. In this study, BIST100 index is used as an indicator for the Turkish financial market as in the other studies such as Hatipoglu and Umut (2019), Chadwick and Ozturk (2018) and Sengul and Yilmaz (2019). In the literature, it is seen that the equity volatility is chosen as a common variable in many researches on systemic risk.…”

Banking Risk in Selected MENA Countries

“…Alber [4]; Kleinow and Nell [9]; Khiari and Nachnouchi [10]), however, Hunjra, et al [6] and Weiß, et al [11] determined that larger banks tend to be associated with lower risk. In contrast to most studies considering leverage positively influencing bank risk (such as Anghelache and Oanea [12]; Borri, et al [13]; Sengul and Yilmaz [14]); Cicak [15] and Qin and Zhou [16] reached a result that less leveraged banks are connected to greater risk.…”

“…Papanikolaou and Wolff [21] find a negative impact on economic growth and inflation on banking risk. While Sengul and Yilmaz [14] reveal a positive association between economic growth and risk measure. And according to Vallascas and Keasey [7], economic growth and inflation are insignificant.…”