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Asset Commonality and Systemic Risk Among Large Banks in the United States

By Sharon Blei, Bakhodir Ergashev

September 2014


In this paper, we present a compellingly simple yet innovative approach to capturing the buildup of systemic risk associated with commonalities in banks' asset holdings. We draw on a growing strand of theoretical literature that studies the systemic externalities of banks' balance sheet asset side allocations. By applying data aggregation and clustering techniques to publically available balance sheet data, we uncover interesting patterns in the asset holdings of the major bank holding companies in the United States during the years 2001-2013. We augment our findings with theoretical analysis and insight. Based on our analysis, we construct a novel measure of systemic risk, ACRISK, where AC stands for asset commonality. This measure captures well the buildup of systemic risk that culminated in the global credit crisis, and provides empirical support to the asset commonality theoretical notions. Full paper (PDF)


Any whole or partial reproduction of material in this paper should include the following citation: Sharon Blei and Bakhodir Ergashev, "Asset Commonality and Systemic Risk Among Large Banks in the United States," Office of the Comptroller of the Currency, Economics Working Paper 2014-3, September 2014.