TY  - JOUR
A1  - Rau-Bredow, Hans
T1  - Bigger is not always safer: a critical analysis of the subadditivity assumption for coherent risk measures
JF  - Risks
N2  - This paper provides a critical analysis of the subadditivity axiom, which is the key condition for coherent risk measures. Contrary to the subadditivity assumption, bank mergers can create extra risk. We begin with an analysis how a merger affects depositors, junior or senior bank creditors, and bank owners. Next it is shown that bank mergers can result in higher payouts having to be made by the deposit insurance scheme. Finally, we demonstrate that if banks are interconnected via interbank loans, a bank merger could lead to additional contagion risks. We conclude that the subadditivity assumption should be rejected, since a subadditive risk measure, by definition, cannot account for such increased risks.
KW  - coherent risk measures
KW  - subadditivity
KW  - bank mergers
KW  - regulatory capital
Y1  - 2019
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:bvb:20-opus-201808
VL  - 7
IS  - 3
ER  -