RT Journal Article
T1 Bank risk behavior and connectedness in EMU countries
A1 Singh, Manish
A1 Gómez-Puig, Marta
A1 Sosvilla Rivero, Simón Javier
AB Given the structural differences in banking sector and financial regulation at national level in EMU, this paper tries to estimate the banking sector risk behavior at country level. Based on contingent claim literature, it computes “Distance-to-default (DtD)” at bank level and analyses the aggregate series at country level for a representative set of banks over the period 2004-Q4 to 2013-Q2. The indices provide an intuitive, forward-looking and timely risk measure having strong correlations with national/regional market sentiment indicators. An underlying trend exists but causality tests suggest no systemic component. Cross-sectional differences in DtD suggests fragility in EMU countries 12-18 months prior to the crisis and better predictive ability than the regulatory index based on large and complex banking institutions at European level. Furthermore, we explore the reasons for this divergence using VAR estimates.
PB Elsevier
SN 0261-5606
YR 2015
FD 2015
LK https://hdl.handle.net/20.500.14352/34190
UL https://hdl.handle.net/20.500.14352/34190
LA eng
NO Ministerio de Economía y Competitividad (MINECO)/FEDER
NO Fundación Bando de Sabadell
DS Docta Complutense
RD 9 abr 2025