Title: A multivariate approach to measure the dimension of a bank
Authors: Alessandro Berti - Urbino University Carlo Bo (Italy) [presenting]
Cinzia Franceschini - Tuscia University (Italy)
Nicola Loperfido - University of Urbino (Italy)
Abstract: The dimension of a bank is a central issue for practitioners, authorities and academics. In particular, policymakers often rely on the too big to fail theory, asserting that certain financial institutions are so large that their failure would be disastrous to the economic system. We measured banks dimensions by means of the common dominant principal component of several covariance matrices. We found that the proposed measure is stable, reliable and robust. Data are balance sheet ratios of Italian banks collected by the Bank of Italy during several years.