THE DETERMINANTS OF SYSTEMIC RISK: EVIDENCE FROM INDONESIAN COMMERCIAL BANKS

Abstract

This paper examines the determinants of systemic risk across Indonesian commercialbanks using quarterly data from 2001Q4 to 2017Q4. Employing four measures ofsystemic risk, namely value-at-risk (VaR), historical marginal expected shortfall(MESH), marginal expected shortfall from GARCH-DCC (MESdcc), and long-runmarginal expected shortfall (LRMES), we find that bank size is positively related tosystemic risk, whereas banks and economic loan activity are negatively related tosystemic risk. These findings suggest that the government needs to regulate loanactivities and to monitor big banks as they have significant impacts on bank systemicrisk.