Title:
SYSTEMIC RISK AND DIVERSIFICATION IN TURKISH BANKING SYSTEM

Authors:
ASS. PROF. NESLIHAN TOPBAS

Volume - 2 Issue - 10, Pages - 4767-4782

Abstract:
Since the global financial crisis, the attention of financial market actors, especially regulators, have focused on the systemic risk concept. The systemic risk can be defined as the situation when the failure of a (limited number of) financial institution(s) or the crash of a financial market creates domino effect on several other financial institutions or markets resulting with their failure emanating from the initial idiosyncratic shock. This study contributes to literature by being the one of the rare analysis of Turkish banking system in terms of diversification and systemic risk. In the analysis, diversification was measured by classifying bank's non-interest- related activities into net commission revenue, net trading revenue and all other net revenue. The systemic risk was measured by using Contingent Claims Analysis (CCA) that incorporates market-based and balance sheet information to obtain financial risk indicators, such as Distance-to-Default (DD). The data consist of quarterly calculated average diversification indicator (ADI), weighted average diversification indicator (WADI), distance-to-default (DD) and weighted average distance-to-default (WADD) for top 6 Turkish commercial banks in in the period between 2009 and 2016. The results show that the relation between diversification and systemic risk is ambiguous as parallel to the analysis performed other countries.

Cite this Article:

[TOPBAS, NESLIHAN. "SYSTEMIC RISK AND DIVERSIFICATION IN TURKISH BANKING SYSTEM." International Journal of Social Science and Economic Research, vol. 2, no. 10, 2017, pp. 4767-4782. October.]