Assessing global systemically important banks and implications for entrepreneurship: a hierarchy stochastic multicriteria acceptability analysis

Abstract

Purpose

The financial crisis of 2007–2008 has brought critical attention to those financial institutions whose high destabilizing effects can have an impact on the financial system. Basel Committee (BIS) has introduced a set of regulations to identify such banks, defined global systemically important banks (G-SIBs). The purpose of this paper is to investigate the robustness of the BIS's methodology.

Design/methodology/approach

In this study, a multicriteria decision aid (MCDA) approach is considered, specifically HSMAA (hierarchy stochastic multiobjective acceptability analysis), which can take into account uncertainty on BIS's criteria weights as standard SMAA, but also uncertainty with respect to the subcriteria of the considered criteria. The results are analyzed to provide insights into the robustness of the BIS's methodology.

Findings

The obtained results indicate that overall the BIS's methodology does not appear robust. Within the two uncertainty scenarios considered, the results show a great variability in identifying the G-SIBs' systemic risk.

Originality/value

The paper proposes an analytical way to assess the robustness of the BIS's methodology. Moreover, the authors’ analysis reveals a great variability on the results, which highlight different issues for banks, regulators and enterprises.

Citation

Angilella, S. and Mazzù, S. (2020), "Assessing global systemically important banks and implications for entrepreneurship: a hierarchy stochastic multicriteria acceptability analysis", Management Decision, Vol. 58 No. 11, pp. 2387-2415. https://doi.org/10.1108/MD-09-2019-1139