Backgrounds for creating unified criteria for systemically important banks at the EAEU level: clustering approach

Abstract

The problems of identifying systemically important banks have not lost their relevance for more than 10 years, and the issues of developing uniform criteria for them in economic unions are of particular interest. The formation of clusters of SIBs (systemically important banks) within the EAEU will improve the quality of financial services provided by the banks in the participating countries, and will also strengthen the innovative potential of the economic union. The purpose of the study is to examine, through the application of clustering methodology (Euclidean distance metrics and Hamming models), the backgrounds and fundamental possibilities for developing uniform criteria for identifying SIBs for Kazakhstan, Belarus and Russia, as participating countries of the Eurasian Economic Union. At the same time, methodological recommendations for national systemically important banks developed by the Basel Committee on Banking Supervision are taken into account. The results of the study showed that the grouping of banks classified in individual EAEU countries as SIBs is logical when three clusters are identified: Level 1 (integration), Level 2 (country), and Level 3 (potential). The analysis emphasizes that when developing unified criteria, it is
necessary to develop indicators that are not approximated with each other. In addition, the criteria must be clearly and strictly defined, and similar features (indicators) must be significantly different. The present study is comprised of two sections; this paper is part of the second section.