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From sovereigns to banks: evidence on cross-border contagion

Author

Listed:
  • Alesia Kalbaska

    (University of Siena)

  • Cesario Mateus

    (University of Roehampton)

Abstract

This paper analyses the evolution of the banking system sensitivity to cross-border contagion in 2006–2011. The study is performed on the basis of the BIS data on cross-border exposures and the Bankscope data on Tier 1 capital of 20 banking systems (Australia, Austria, Belgium, Canada, Finland, France, Germany, Greece, India, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Sweden, Switzerland, Turkey, the UK, and the USA). Since the European sovereign debt crisis took a decisive turn at the end of 2009, markets started looking at its main protagonists—Greece, Ireland, Italy, Portugal, and Spain (GIIPS)—with a lot of anxiety. However, unexpectedly, we find that a single failure among GIIPS could be absorbed by the network. Our results reveal that the USA, the UK, France, and Germany pose the highest threat to the systemic stability. Moreover, the resilience of the banking systems to contagion risks tends to improve over the years.

Suggested Citation

  • Alesia Kalbaska & Cesario Mateus, 2019. "From sovereigns to banks: evidence on cross-border contagion," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(1), pages 86-103, March.
    • Handle: RePEc:pal:jbkreg:v:20:y:2019:i:1:d:10.1057_s41261-018-0068-1
    DOI: 10.1057/s41261-018-0068-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Contagion; Systemic risk; Furfine algorithm; Stress testing; GIIPS;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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