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Title: Bank risk behavior and connectedness in EMU countries
Author: Singh, Manish Kumar
Gómez-Puig, Marta
Sosvilla Rivero, Simón, 1961-
Keywords: Risc (Economia)
Avaluació del risc
Unions monetàries
Mercat financer
Risk assessment
Monetary unions
Financial market
Issue Date: Oct-2015
Publisher: Elsevier Ltd
Abstract: Given the structural differences in banking sector and financial regulation at country level in European Economic and Monetary Union (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 analyzes 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.
Note: Versió postprint del document publicat a:
It is part of: Journal of International Money and Finance, 2015, vol. 57, num. October, p. 161-184
Related resource:
ISSN: 0261-5606
Appears in Collections:Articles publicats en revistes (Economia)

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