Determinants of Systemic Risk: The Case of Egyptian Banks

Abstract

This paper aims at analyzing the effects of "size", "financial stability" and "equity return" on the systemic risk ofEgyptian banks. This has been conducted using a sample of 11 banks (out of 14 banks listed in the Egyptianexchange), and covering the period from January 2003 to December 2013. Systemic risk is measured by "Valueat Risk" that expresses the maximum loss within a q%-confidence interval during a certain period of time.Determinants of systemic risk to be examined, may be economic, as "size" in terms of TBTF rule. They may befinancial, where "financial stability" is addressed as the ability of financial system to resolve systemic risks.Besides, "equity return" is assumed as a market determinant. Results indicate that size and financial stabilitymay affect systemic risk of Egyptian banks during research period, using cross sectional analysis, by monthlyreturns (1-month, 0.99 VaR) for the pre-crisis, during-crisis and all the research periods. Also, robustness checkinvestigates the effect of financial stability, using time series analysis, by daily returns (1-day, 0.99 VaR).