Systemic Risk Contribution and Bank’s Competitiveness

  • buddi wibowo universitas Indonesia


There are two competing views about bank’s competitiveness and its systemic risk contribution: competition-stability and competition-fragility. Previous research shows mixed results. To test empirically the relationship, this research proposes a quadratic functional form that may reconciliate these two opposite views. Using Marginal Expected Shortfall as individual bank’s systemic risk contribution measurement and Lerner Index as individual bank’s competitiveness, this research find that the relationship resembles U-shape. In the first phase, competition creates prudent banking operation and low systemic risk contribution. But when competition become excessive, competition drive dominant bank to be a systematically important financial institution which may cause a serious systemic defaults and threat financial system stability.


Download data is not yet available.


Acharya, V. V. (2009). A theory of systemic risk and design of prudential bank regulation. Journal of Financial Stability.
Acharya, V. V., Pedersen, L. H., Philippon, T., & Richardson, M. (2017). Measuring systemic risk. Review of Financial Studies.
Anginer, D., Demirgüç-Kunt, A., & Mare, D. S. (2018). Bank capital, institutional environment and systemic stability. Journal of Financial Stability.
Braun, P. A., Nelson, D. B., & Sunier, A. M. (1995). Good News, Bad News, Volatility, and Betas. The Journal of Finance.
Brissimis, S. N., & Delis, M. D. (2011). Bank-level estimates of market power. European Journal of Operational Research.
Brownlees, C. T., & Engle, R. F. (2012). Volatility, Correlation and Tails for Systemic Risk Measurement. SSRN Electronic Journal.
Danielsson, J., James, K. R., Valenzuela, M., & Zer, I. (2016). Model risk of risk models. Journal of Financial Stability.
Demirguc-Kunt, A., & Peria, M. S. M. (2010). A Framework for Analyzing Competition in the Banking Sector. Policy research.
Goetz, M. R. (2018). Competition and bank stability. Journal of Financial Intermediation.
Hellmann, T. F., Murdock, K. C., & Stiglitz, J. E. (2000). Liberalization, moral hazard in banking, and prudential regulation: Are capital requirements enough? American Economic Review.
Hristov, N., Hülsewig, O., & Wollmershäuser, T. (2015). The interest rate pass-through in the Euro area during the global financial crisis. Journal of Banking and Finance.
Jeon, J. Q., & Lim, K. K. (2013). Bank competition and financial stability: A comparison of commercial banks and mutual savings banks in Korea. Pacific Basin Finance Journal.
Keeley, M. C. (1990). Deposit insurance, risk, and market power in banking. American Economic Review.
Martinez-Miera, D., & Repullo, R. (2010). Does competition reduce the risk of bank failure? Review of Financial Studies.
Wang, K. M., & Lee, Y. M. (2009). Market volatility and retail interest rate pass-through. Economic Modelling.
Wibowo, B., & Lazuardi, E. (2018). Uji Empiris Mekanisme Transmisi Kebijakan Moneter: Interest Rate Pass-through Sektor Perbankan Indonesia. Jurnal Ekonomi Dan Pembangunan Indonesia.
How to Cite
WIBOWO, buddi. Systemic Risk Contribution and Bank’s Competitiveness. Journal of Accounting, Business and Management (JABM), [S.l.], v. 29, n. 2, p. 132-141, nov. 2022. ISSN 2622-2167. Available at: <>. Date accessed: 07 dec. 2023. doi: