Sources of systemic risk in shadow banking and the formative indicators in PLS-SEM

Consequences of systemic risk in regulated banking sector are reflective indicators in PLS-SEM

1) Complex derivatives such as collateralized debt obligations (CDOs) ($) {MICRO}

Reference [10]

1) Total regulatory capital ratio {MICRO}

Reference [10]

2) Complex derivatives such as collateralized loan obligations (CLOs) ($) {MICRO}

Reference [10]

2) Non-interest income scaled by interest income {MICRO}

Reference [10]

3) Repurchase agreements ($) {MICRO}

Reference [10]

3) Non-performing loans scaled by total loans {MICRO}

Reference [10]

4) Number of SB facilities incorporated in offshore financial centers associated with a bank adjusted for firm size {MACRO}

Reference [10]

4) Financial beta defined as volatility of bank share price relative to the overall stock market {MACRO}

Reference [10]

5) Number of associations with structured credit vehicles for a given bank adjusted for firm size {MACRO}

Reference [10]

5) Modified Basel Committee on Banking Supervision score approximating domestic systemic importance of banks {MACRO}

Reference [10]

6) The ratio of a bank’s stock price to the banking sector stock index {MACRO}

Reference [23]