Systemic risk, bankâ€™s capital buffer, and leverage
This paper measures individual bankâ€™s impact on banking systemic risk and examines the effect of individual bankâ€™s capital buffer and leverage to bankâ€™s systemic risk impact in Indonesia during 2010-2014. Using Mertonâ€™s distance-to-default to measure systemic risk, the study shows a significant negative relationship between bankâ€™s capital buffer and systemic risk. High capital buffer tends to lowering bankâ€™s impact on systemic risk. Bankâ€™s leverage level also influences its contribution to systemic risk, even though the impact is much lower compared to that of capital buffer impact.
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Economic Journal of Emerging Markets (EJEM)
ISSN 2086-3128 (print), ISSN 2502-180X (online)
Center for Economic Studies, Department of Economics,
Universitas Islam Indonesia, Indonesia.
EJEM by http://journal.uii.ac.id/JEP/ is licensed under a Creative Commons Attribution 4.0 International License.