New Capital Requirements Reduce Systemic Risk in Nigerian Banking System
The article discusses how setting capital requirements for banks based on their risk contribution can help manage systemic risk in the banking system. By reallocating capital in different scenarios, the study shows that banks may need to hold more or less capital depending on the presence of system shocks. Implementing macroprudential regulations can significantly decrease systemic risk, with the risk allocation mechanism based on ΔCoVaR showing the most effective results in reducing default probability.