Review Reports - Understanding Systemic Risk Dynamics and Economic Growth: Evidence from the Turkish Banking System

Round 1

Reviewer 1 Report

In the article "Understanding Systemic Risk Dynamics and Economic Growth: Evidence from the Turkish Banking System," the authors delve into the dynamics of systemic risk within the Turkish banking system and its impact on sustainable economic growth. The study covers the period from 2007 to 2022, focusing on the aftermath of the global financial crisis and the subsequent banking crisis in Turkey.

The abstract provides a clear overview of the article, outlining the research objectives and methodology. It highlights the importance of systemic risk and its implications for economic growth, emphasizing the need for proactive measures and policy interventions to manage and mitigate these risks. This sets the stage for a comprehensive analysis of the Turkish banking system's systemic risk dynamics and its repercussions on the broader economy.

The authors employ several analytical methods, such as the Component Expected Shortfall (CES) method and Quantile Spillover Analysis, to identify major sources of systemic risk within the Turkish banking system.

The article's contribution to the literature lies in its focus on the Turkish banking system and its exploration of the relationship between systemic risk and economic growth within this specific context. By employing various analytical approaches, the authors provide valuable insights into the dynamics of systemic risk and its implications for the Turkish economy. The findings highlight the necessity for regulators and policymakers to prioritize systemic risk management and implement timely policies and rules to prevent the accumulation of risks and address existing hazards.

While the article offers a broad overview of the existing body of knowledge, there are a few areas where some limitations can be identified:

1-One aspect that could be further improved is the inclusion of a more detailed discussion on the specific proactive measures and policy implications proposed. Providing specific recommendations for regulators and policymakers would enhance the practicality and applicability of the research findings.

2- In reviewing the literature, one notable concern is the presence of duplicate or repetitive information within the selected studies and ideas. While the authors have attempted to synthesize relevant studies, there appear to be instances where similar findings or concepts are repeatedly presented without providing additional insights or value. Please avoid repetitions.

Lastly, the article is very compatible with the journal

It is good. Check minor editing.

Author Response

I would like to express my sincere gratitude for your thorough review of our paper titled." Your insightful feedback has been immensely valuable in refining the quality and applicability of the study. Thank you once again for your invaluable contribution to the enhancement of my work. I look forward to any further insights you may have.

Please find the attachement word document.

Author Response File: Author Response.pdf

Reviewer 2 Report

This study is quite interesting and the outcome of the study will be a significant contribution to the body of knowledge after some changes. Below are some comments to address:

The introduction section needs some changes. It should be started with a broader area/ context/ general discussion then relate it to your topic and highlight gaps/issues/problems in your context/area of research. Then present your proposed solution/objectives to address such issues/problems. Also highlight the contributions of your study therein.

The literature review is very detailed but need to be presented in subsections. Also provide theoretical support for your study.

There should be a debate on why the banking industry is important and what will be its consequences if it fails. As the banking funds are not only supported by the shareholder but their funds also come from general public, investment account holder and society, therefore banks needs to be sustainable.... You can consult the following papers and can revise your paper accordingly:

https://www.sciencedirect.com/science/article/abs/pii/S0959652621023179 https://www.tandfonline.com/doi/abs/10.1080/13504509.2022.2134230

Link your study with sustainability/ SDGs to show relevancy of your work with the journal scope. In this regard, your work can be linked with SDG-8 and others as well.

The findings should be supported by recent literature.

The conclusion should be precise and focused to summarize your study.

I hope the above papers will help in this regard.

General comments:

Paper requires proofreading as there are some space/ double space issues throughout the paper.

The reference style and formatting should be changed.

The double space issues need to resolved.

Author Response

Response to Reviewer 2 Comments

We really appreciate the time and effort that you dedicated to providing feedback on our manuscript and are grateful for the insightful comments on and valuable improvements to our paper. We have incorporated the suggestions made by the reviewers. Those changes are highlighted within the manuscript. Please see below, in red, for a point-by-point response to the reviewers ‘comments and concerns.

Point 1: “The introduction section needs some changes. It should be started with a broader area/ context/ general discussion then relate it to your topic and highlight gaps/issues/problems in your context/area of research. Then present your proposed solution/objectives to address such issues/problems. Also highlight the contributions of your study therein.”

Response 1: we changed and revised the introduction and highlighted related areas on the article.

Point 2: “The literature review is very detailed but need to be presented in subsections. Also provide theoretical support for your study.”

Response 2: Thank you for the valuable feedback. We have taken your suggestion into consideration and restructured the literature review section by organizing it into subsections to enhance readability and navigation. We add two subsections as;

2.1. Methods for Estimating Systemic Risk

2.2. Literature on Analyzing Systemic Risk of the Turkish Financial System

Point 3: “There should be a debate on why the banking industry is important and what will be its consequences if it fails. As the banking funds are not only supported by the shareholder but their funds also come from general public, investment account holder and society, therefore banks needs to be sustainable.... You can consult the following papers and can revise your paper accordingly:

https://www.sciencedirect.com/science/article/abs/pii/S0959652621023179 https://www.tandfonline.com/doi/abs/10.1080/13504509.2022.2134230

Link your study with sustainability/ SDGs to show relevancy of your work with the journal scope. In this regard, your work can be linked with SDG-8 and others as well. “

Jan, A. A., Lai, F. W., Asif, M., Akhtar, S., & Ullah, S. (2023). Embedding sustainability into bank strategy: Implications for sustainable development goals reporting. International Journal of Sustainable Development & World Ecology, 30(3), 229-243.

Jan, A. A., Lai, F. W., & Tahir, M. (2021). Developing an Islamic Corporate Governance framework to examine sustainability performance in Islamic Banks and Financial Institutions. Journal of Cleaner Production, 315, 128099.

Response 3: you integrated the importance of banks and sustainability into the introduction section, along with appropriate citations.

Pivotal in the modern economic framework, the banking sector operates as a crucial conduit for financial activity and growth. Beyond conventional roles of capital distribution and credit facilitation, banks hold a foundational position in preserving financial stability and fostering trust within the larger financial system. Yet, their significance extends beyond these economic functions – they bear the responsibility of safeguarding the financial welfare of individuals, businesses, and communities. This entrusted role as guardians of public funds underscores the severe repercussions that a banking system failure can elicit, potentially setting off a chain reaction of economic disruptions that reverberate through both financial markets and real-world economic activities. In recent years, there has been a significant rise in academic interest centered around sustainable development within the banking system. This heightened focus is evident through the increasing volume of publications in this field. (Jan et al., 2021; Jan et al., 2023)

Against this backdrop, this study embarks on an exploration of systemically important banks in the Turkish banking system and their consequential impact on sustainable economic growth. With a dual objective, the study aims to pinpoint and analyze these banks wielding systemic importance within the Turkish banking system, while also deciphering the intricate interplay between their influence and the trajectory of sustainable economic growth. In doing so, this study aims to contribute to a holistic understanding of these banks' pivotal role in shaping the financial landscape and their contribution to Turkey's long-term economic prosperity.

The significance of the banking sector and its impact on sustainable economic development has garnered renewed attention in 2023. The persistence of systemic crises in 2023, following the events of the 2008 crisis, highlights a concerning reality: there remains a notable gap in fully absorbing the lessons from past crises.

Point 4: “The findings should be supported by recent literature.”

Response 4: In Section 4. “Data and Empirical Result” we added these supporting literature together with our empirical results.

In conclusion, private banks stand out in terms of systemic risk in the Turkish banking system, and among these banks, GARAN, AKBNK, ISCTR, and YKBNK consistently rank at the top throughout the sample period. These results are parallel with the studies of Sacci and Sayılgan (2014), Sengul and Yılmaz (2019), Civan et al (2020) and Calışkan et al (2021). All these studies found these banks are the highest systematic risk contributor within the Turkish Banking System.

However, To the best of our knowledge, the paper is the first attempt to use the Quantile Spillover Analysis and regime-dependent analysis for banks in Turkey. Therefore, we can’t find the supportive literature in Turkish Banking System. Therefore we wrote like below in the article:

The results of the spillover analysis, calculated for the 5% quantile level (indicating downside market conditions), are shown in Table 4. According to these results, it has been determined that there is a high level of connectedness among banks during downside market periods (total connectedness index of 97%). Based on the net spillover results, TSKB, VAKBNK, ISCTR, HALKB, AKBNK, YKBNK, and GARAN are identified as net risk transmitters, while QNBFB, ICBCT, SKBNK, GSDB, and ALBRK are found to be net risk receiver. To the best of our knowledge, the paper is the first attempt to use the Quantile Spillover Analysis and regime-dependent analysis for banks in Turkey. Therefore, we can’t find the supportive literature in Turkish Banking System.

Lastly, we gave supportive results for our empirical results of systemic risk relation and economic growth (industrial production growth) as below:

We conduct a regime-dependent Granger causality test from the SRI to the GIP by imposing restrictions on the autoregressive coefficients in the MS-VAR model. We present the test results in Table 7, which indicates the Granger causality from the SRI to the GIP, at a 10% significance level in the normal regime. On the other hand, the SRI is found to be the Granger cause of the GIP at a 5% significance level in the distressed regime. This finding indicates that the SRI can be considered as a leading indicator for the economic downturn in Turkey and this is consistent with the empirical results of Lin et al. (2018) and Caliskan et al. (2021). They found causality from systemic risk to industrial production.

Point 5: “The conclusion should be precise and focused to summarize your study.”

Response 5: the conclusion has been refined to succinctly encapsulate the study's outcomes, with a heightened emphasis on the results and policy implications. We deleted some explanations. We also added a new part as 6. Discussion and Implications. I wrote red these new parts.

Point 6: “The double space issues need to resolved.“

Response 6: What our understanding from this comment is to eliminate repetitive paragraps/issues. I accomplished this by checking the whole article completely.

Author Response File: Author Response.pdf

Reviewer 3 Report

I have several comments on the writing and structure of this paper.

1. Section “2. Literature Review” is not a short section. I suggest that this section can be divided into several explicit subsections. In this way, the readers can understand the structure of the literature review more clearly.

2. On page 4 and page 13, there are two short footnotes. I suggest that these two footnotes can be directly incorporated into the main text. There is no much need to put two short footnotes.

3. In Section “4. Data and Empirical Results”, there is only one subsection “4.1. The Relationship between Systemic Risk and Economic Growth”. Before this subsection, there are more than one hundred lines (from Line 432 to Line 552) to analyze the systemic risks. I suggest that this part should be constructed as an independent subsection.

4. The headline of the last section should be “5. Conclusion”, not “6. Conclusion”.

Author Response

Response to Reviewer 3 Comments

Point 1: “ “Section “2. Literature Review” is not a short section. I suggest that this section can be divided into several explicit subsections. In this way, the readers can understand the structure of the literature review more clearly.”

Response 1: Thank you for the valuable feedback. We have taken your suggestion into consideration and restructured the literature review section by organizing it into subsections to enhance readability and navigation. We add two subsections as;

2.1. Methods for Estimating Systemic Risk

2.2. Literature on Analyzing Systemic Risk of the Turkish Financial System

Point 2: “On page 4 and page 13, there are two short footnotes. I suggest that these two footnotes can be directly incorporated into the main text. There is no much need to put two short footnotes.”

Response 2: Thank you .We incorporated the footnotes into the main text.

Point 3: “In Section “4. Data and Empirical Results”, there is only one subsection “4.1. The Relationship between Systemic Risk and Economic Growth”. Before this subsection, there are more than one hundred lines (from Line 432 to Line 552) to analyze the systemic risks. I suggest that this part should be constructed as an independent subsection.”

Response 3: Thank you for your suggestion. In Section 4. I added 3 more subsections. So there are 4 subsections as below.

4.1. Details of the Data

4.2. MES Results and Systematically Important Banks

4.3. Results of the Spillover Analysis

4.4. The Relationship between Systemic Risk and Economic Growth

Point 5: “ The headline of the last section should be “5. Conclusion”, not “6. Conclusion”.

Response 5: We corrected the conclusion section as “5.” Thank you.

Author Response File: Author Response.pdf

Reviewer 4 Report

The topic is very interesting and examines a critical aspect of economic growth to prevent financial crunch. Systemic risk dynamics has a significant impact on the growth of economy. Hence, using Turkish Banking system to explore the nexus will add up to existing literature and provide some policy implication guide for countries.

The paper is well structured and written in a scientific manner. The author in the introduction gave a good background and why the need for the study following some financial institutions collapse. The methods used are well elaborated to allow for duplication of study using other countries or regional analysis.

Below are two suggestions to improve the quality of the manuscript.

Firstly, the list of banks and their codes are provided in section four. However, the code names are mentioned in the abstract and the introduction which makes it difficult for the readers to apprehend the flow of the paper well. I recommend that, the author use the bank names or avoid using specific bank names in the abstract to allow easy flow of the paper.

Secondly, in the literature review, I was expecting to see the actual hypothesis the author was going to test but there was no statement on the hypothesis for the study.

Notwithstanding these two minor issues identify, the manuscript addresses an essential aspect of global economy and the paper is well presented.

Author Response

Response to Reviewer 4 Comments

Point 1: “Firstly, the list of banks and their codes are provided in section four. However, the code names are mentioned in the abstract and the introduction which makes it difficult for the readers to apprehend the flow of the paper well. I recommend that, the author use the bank names or avoid using specific bank names in the abstract to allow easy flow of the paper.”

Response 1:

We appreciate your insights regarding the use of specific bank codes in the abstract and introduction. We agree that enhancing the readability and comprehension of the paper is essential. In response, we have taken steps to ensure a smoother flow by replacing the bank codes with their respective names in the abstract and introduction and give the codes in brackets.

Garanti Bank (GARAN), Akbank (AKBNK), İş Bank (ISCTR), and Yapı ve Kredi Bank (YKBNK), are identified as major sources of systemic risk. The analysis reveals a high level of interconnectedness among the banks during market downturns, with TSKB, Vakıfbank (VAKBNK), İş Bank (ISCTR), Halk Bank (HALKB), Akbank (AKBNK), Yapı ve Kredi Bank (YKBNK), and Garanti Bank (GARAN) serving as net risk transmitters, while QNB Finansbank (QNBFB), ICBC Turkey Bank (ICBCT), Şekerbank (SKBNK), and Albaraka Türk (ALBRK) act as net risk receivers.

Point 2: “I was expecting to see the actual hypothesis the author was going to test but there was no statement on the hypothesis for the study.”

Response 2: Thank you . I add hypotheses and theories in the introduction part please see as below:

For Turkey, the significance of sustainability and the management of systemic risk within the banking sector takes on even greater importance. This is due to the substantial role that the banking sector occupies within the broader financial system of the country. According to the Banks Association of Türkiye Report, banks are the largest financial corporations in Turkey, accounting for about 82% of the total assets of the financial sector as of September 2021 (BAT, 2021). Therefore, banks are the most significant players in Turkey's financial system. There are 57 banks operating in Turkey as of 2021, including state-owned, private, and foreign banks (BAT, 2021). The main aim of the article is to investigate systemically significant banks in Turkey. The "Too Big to Fail" theory refers to the perception that certain financial institutions are so large and interconnected that their failure could have severe systemic consequences, necessitating government intervention to prevent their collapse. This theory underscores the importance of identifying and monitoring systemically significant banks, also known as Systemically Important Financial Institutions (SIFIs). The designation of SIFIs recognizes that the failure of these institutions could lead to widespread financial disruptions and pose systemic risks to the entire financial system and economy (Lin, 2012). Thus, the first hypotheses to test if there are systemically significant banks in Turkey, so we can utilize the "Too Big to Fail" concept and the SIFI framework as theoretical underpinnings. To this end, the stock returns and market values of the publically traded 13 banks are analyzed. To define the systemically leading banks of Turkey, the Component Expected Shortfall (CES) approach is applied for the period 2007-2022 in this study.

We also conduct a Quantile Spillover Analysis to uncover the relationships among banks during periods of unexpected losses. Therefore, our second aim is to assess systemic risk by examining how shocks or losses propagate across the banking network. Financial network theory offers a theoretical framework to understand how shocks and losses propagate across interconnected financial institutions. This theory posits that the interdependencies among banks create a complex web of relationships through which disturbances can spread, potentially amplifying systemic risk. (Acemoglu, Ozdaglar, and Tahbaz-Salehi, 2015) Based on financial network theory, we test if there is a significant relationship among banks' unexpected losses, indicating that shocks do propagate across the banking network, contributing to systemic risk.

Once the dynamics and systemically important banks are identified using these methods, the study proceeds to analyze the impact of systemic risk on the sustainable economic growth. The third aim of this study is to investigate the relationship between economic growth and systemic risk levels. To achieve this, we employ a Markov Switching VAR (MS-VAR) model with a systemic risk index and industrial production growth rate that allows for regime-dependent relationships between the variables. Additionally, the study likely employs regime-dependent impulse response analysis to understand how the systemically important banks' risk profile affects the industrial production growth rate during different economic regimes.

The financial accelerator theory offers a theoretical lens through which to explore the potential relationship between systemic risk and economic growth, specifically represented by industrial production. This theory, initially developed by Bernanke, Gertler, and Gilchrist (1999), highlights the interplay between financial conditions and the real economy. It posits that fluctuations in the financial sector can amplify the impact of shocks on real economic activity. Based on the theoretical framework of the Financial Accelerator Theory and its application to the relationship between systemic risk and economic growth (industrial production), our hypothesis to test is if there is significant relationship between systemic risk and industrial production growth in the Turkish banking system

The paper aims to contribute to the existing literature in several ways. Firstly, we make extensive use of data set for the Turkish banking system to examine systemically important banks. Secondly, we employ the Quantile Spillover Analysis to determine the network topology among the banks under the downside market conditions. Finally, the MS-VAR is employed to determine regime-dependent Granger causality and impulse-responses analysis between systemic risk and economic growth. To the best of our knowledge, the paper is the first attempt to use the Quantile Spillover Analysis and regime-dependent analysis for banks in Turkey. Therefore, the primary motivation for this study unfolds along three pivotal dimensions that collectively extend the boundaries of knowledge. Ultimately, our research aspires to illuminate uncharted dimensions in the intricate web of financial stability, forging a path for more informed decision-making by regulators, policymakers, and stakeholders navigating the complexities of the Turkish banking landscape.

Author Response File: Author Response.pdf

Reviewer 5 Report

The paper, in its present form, needs major revision.

In particular:

1. The introduction is very weak. It seems like authors are immediately jumping from one point to another when they talk about this topic. I think the transition should be smoother. Also, the motivation and contribution of this study are not clear.

2. There is no theoretical model or transmission mechanism in this paper.

3. In results section, authors should focus on explaining results rather the description of methodology which you have used and the number which you obtained.

4. The study uses the sample period of 2007 to 2022. The logic and reason behind this time period is not clearly stated.

5. Authors also need to provide more discussion on the empirical results. And this paper does not provide practical implications of the empirical analyses, as well as the events in Turkey.

6. More solid conclusions should be made, especially the case study or suggestions in Turkey can be discussed. After all, it is the lesson we need to learn at the end of the day.

7. Check the grammar throughout the article and correct it. Proofread the article as many language errors were identified.

The paper, in its present form, needs major revision.

In particular:

2. There is no theoretical model or transmission mechanism in this paper.

3. In results section, authors should focus on explaining results rather the description of methodology which you have used and the number which you obtained.

4. The study uses the sample period of 2007 to 2022. The logic and reason behind this time period is not clearly stated.

5. Authors also need to provide more discussion on the empirical results. And this paper does not provide practical implications of the empirical analyses, as well as the events in Turkey.

6. More solid conclusions should be made, especially the case study or suggestions in Turkey can be discussed. After all, it is the lesson we need to learn at the end of the day.

7. Check the grammar throughout the article and correct it. Proofread the article as many language errors were identified.

Author Response

Response to Reviewer 5 Comments

Point 1. The introduction is very weak. It seems like authors are immediately jumping from one point to another when they talk about this topic. I think the transition should be smoother. Also, the motivation and contribution of this study are not clear.

Response 1: We acknowledge your comments on the flow of the introduction and the need for clearer motivation and articulation of the study's contribution. As a response, we have taken these points to heart and made significant revisions to the introduction. We now initiate the introduction by underscoring the pivotal importance of the banking system. By presenting this foundation in red, we aim to provide a strong grounding for readers to appreciate the subsequent sections smoothly. Addressing your concern about the motivation and contribution, we have refined the text to distinctly highlight the significance of our study and elucidate its unique contributions to the field.

Point 2. There is no theoretical model or transmission mechanism in this paper.

Response 2: I add hypotheses and theories in the introduction part :

Introduction

……

For Turkey, the significance of sustainability and the management of systemic risk within the banking sector takes on even greater importance. This is due to the substantial role that the banking sector occupies within the broader financial system of the country. According to the Banks Association of Türkiye Report, banks are the largest financial corporations in Turkey, accounting for about 82% of the total assets of the financial sector as of September 2021 (BAT, 2021). Therefore, banks are the most significant players in Turkey's financial system. There are 57 banks operating in Turkey as of 2021, including state-owned, private, and foreign banks (BAT, 2021). The main aim of the article is to investigate systemically significant banks in Turkey. The "Too Big to Fail" theory refers to the perception that certain financial institutions are so large and interconnected that their failure could have severe systemic consequences, necessitating government intervention to prevent their collapse. This theory underscores the importance of identifying and monitoring systemically significant banks, also known as Systemically Important Financial Institutions (SIFIs). The designation of SIFIs recognizes that the failure of these institutions could lead to widespread financial disruptions and pose systemic risks to the entire financial system and economy (Lin, 2012). Thus, the first hypotheses to test if there is systemically significant banks in Turkey, so we can utilize the "Too Big to Fail" concept and the SIFI framework as theoretical underpinnings. To this end, the stock returns and market values of the publically traded 13 banks are analyzed. To define the systemically leading banks of Turkey, the Component Expected Shortfall (CES) approach is applied for the period 2007-2022 in this study.

We also conduct a Quantile Spillover Analysis to uncover the relationships among banks during periods of unexpected losses. This analysis helps assess systemic risk by examining how shocks or losses propagate across the banking network. Financial network theory offers a theoretical framework to understand how shocks and losses propagate across interconnected financial institutions. This theory posits that the interdependencies among banks create a complex web of relationships through which disturbances can spread, potentially amplifying systemic risk. (Acemoglu, Ozdaglar, and Tahbaz-Salehi, 2015) Based on financial network theory, we test if there is a significant relationship among banks' unexpected losses, indicating that shocks do propagate across the banking network, contributing to systemic risk.

Once the dynamics and systemically important banks are identified using these methods, the study proceeds to analyze the impact of systemic risk on the sustainable economic growth. To achieve this, we employ a Markov Switching VAR (MS-VAR) model with a systemic risk index and industrial production growth rate that allows for regime-dependent relationships between the variables. Additionally, the study likely employs regime-dependent impulse response analysis to understand how the systemically important banks' risk profile affects the industrial production growth rate during different economic regimes.

Point 3. In results section, authors should focus on explaining results rather the description of methodology which you have used and the number which you obtained.

Response 3: Thank you for your comment. I summarize the emrical part as you suggested.

Point 4. The study uses the sample period of 2007 to 2022. The logic and reason behind this time period is not clearly stated.

Response 4: Thank you for your comment. The chosen sample period of 2007 to 2022 for examining systemic risk in the Turkish banking sector is grounded in several significant events and contextual factors that influence the banking landscape during this time span. Here’s a paragraph you can consider adding to explain the logic and reason behind the chosen sample period in section 4.1.

4.1. Details of the Data

The aim of the study is to identify systematically important banks and interrelationships among banks in the banking system of Turkey and hence we use a total of 13 banks that operated continuously in the stock market between 2007 and 2022. The chosen sample period of 2007 to 2022 for examining systemic risk in the Turkish banking system is underpinned by its alignment with significant events and contextual shifts that exert substantial influence on the banking sector's dynamics. Beginning in 2007, this period encapsulates the global financial crisis of 2008, affording an opportunity to assess pre-crisis conditions and subsequent regulatory reforms. The timeframe also encompasses pivotal junctures in Turkey's history, including the constitutional referendum of 2010, European Debt the Gezi Park protests of 2013, the 2016 coup attempt, and the onset of the COVID-19 pandemic 2020. In addition, it encompasses the 2018 and 2021 currency shocks, which further contribute to the diverse array of economic challenges impacting the banking sector. By analyzing this comprehensive span of events, this study aims to elucidate how the Turkish banking system navigated through economic volatility, geopolitical upheavals, and global uncertainties, thereby facilitating a comprehensive evaluation of systemic risk spillovers and its intricate interplay with transformative events. Thereby facilitating a comprehensive evaluation of systemic risk and its intricate interplay with transformative events. In addition to these aims, the study also seeks to investigate the interrelationships among banks during periods of unexpected losses, as well as the relationships between economic growth and systemic risk.

Point 5. Authors also need to provide more discussion on the empirical results. And this paper does not provide practical implications of the empirical analyses, as well as the events in Turkey.

Response 5:

We added new last section that gives 6.Discussion and Implications

Point 6. More solid conclusions should be made, especially the case study or suggestions in Turkey can be discussed. After all, it is the lesson we need to learn at the end of the day.

Response 6: We gave these details at the secion 6.Discussion and Implications

Point 7. Check the grammar throughout the article and correct it. Proofread the article as many language errors were identified.

Response 7: Thank you. The paper is checked gramatically with an english teacher and corrected errors. So there is more fluent english now.

Author Response File: Author Response.pdf

Reviewer 6 Report

In my opinion, you have to rewrite the keywords to remove the compound ones and reduce them.

In the introduction, the main objective of the work must be identified, which is presumed in the title, as well as some secondary objective derived from it. It is commented in the document that the work intends to contribute to the existing literature in various ways, but it must be clearly stated what the main objective of the work is.

In the figures and tables it is necessary to put the authorship and the source of elaboration.

It skips to the methodology without establishing hypotheses, H1, H2…etc. The data is poorly explained.

A section called “discussion of results” must be included in which the results obtained are compared with those of the literature review papers.

It would be convenient to include more international jcr bibliography.

For the rest the work is quite good, so congratulate the authors for the originality of it. Finally, it would be convenient to add more international jcr bibliography.

Comments for author File: Comments.pdf

Author Response

Response to Reviewer 5 Comments

Point 2. There is no theoretical model or transmission mechanism in this paper.

Response 2: I add hypotheses and theories in the introduction part :

Introduction

……

For Turkey, the significance of sustainability and the management of systemic risk within the banking sector takes on even greater importance. This is due to the substantial role that the banking sector occupies within the broader financial system of the country. According to the Banks Association of Türkiye Report, banks are the largest financial corporations in Turkey, accounting for about 82% of the total assets of the financial sector as of September 2021 (BAT, 2021). Therefore, banks are the most significant players in Turkey's financial system. There are 57 banks operating in Turkey as of 2021, including state-owned, private, and foreign banks (BAT, 2021). The main aim of the article is to investigate systemically significant banks in Turkey. The "Too Big to Fail" theory refers to the perception that certain financial institutions are so large and interconnected that their failure could have severe systemic consequences, necessitating government intervention to prevent their collapse. This theory underscores the importance of identifying and monitoring systemically significant banks, also known as Systemically Important Financial Institutions (SIFIs). The designation of SIFIs recognizes that the failure of these institutions could lead to widespread financial disruptions and pose systemic risks to the entire financial system and economy (Lin, 2012). Thus, the first hypotheses to test if there is systemically significant banks in Turkey, so we can utilize the "Too Big to Fail" concept and the SIFI framework as theoretical underpinnings. To this end, the stock returns and market values of the publically traded 13 banks are analyzed. To define the systemically leading banks of Turkey, the Component Expected Shortfall (CES) approach is applied for the period 2007-2022 in this study.

Once the dynamics and systemically important banks are identified using these methods, the study proceeds to analyze the impact of systemic risk on the sustainable economic growth. To achieve this, we employ a Markov Switching VAR (MS-VAR) model with a systemic risk index and industrial production growth rate that allows for regime-dependent relationships between the variables. Additionally, the study likely employs regime-dependent impulse response analysis to understand how the systemically important banks' risk profile affects the industrial production growth rate during different economic regimes.

Point 3. In results section, authors should focus on explaining results rather the description of methodology which you have used and the number which you obtained.

Response 3: Thank you for your comment. I summarize the emrical part as you suggested.

Point 4. The study uses the sample period of 2007 to 2022. The logic and reason behind this time period is not clearly stated.

4.1. Details of the Data

Response 5:

We added new last section that gives 6.Discussion and Implications

Point 6. More solid conclusions should be made, especially the case study or suggestions in Turkey can be discussed. After all, it is the lesson we need to learn at the end of the day.

Response 6: We gave these details at the secion 6.Discussion and Implications

Point 7. Check the grammar throughout the article and correct it. Proofread the article as many language errors were identified.

Response 7: Thank you. The paper is checked gramatically with an english teacher and corrected errors. So there is more fluent english now.

Author Response File: Author Response.docx

Round 2

Reviewer 2 Report

Thank you for the opportunity to read your paper. This version is much better and is suitable for publication in the journal. I wish the author(s) all the best.

Reviewer 3 Report

The author has revised the paper. I have no further comment.

Reviewer 5 Report

I think the author(s) have done their best revise their paper, therefore, I'm inclined to accept this paper at its current form.