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Instability In The Cee Banking System. Evidence From The Recent Financial Crisis

Author

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  • Renata Karkowska

    () (Alexandru Ioan Cuza University of Iasi, Romania)

Abstract

Sparked by the recent great recession and the role of financial markets, considerable interest exists among researchers within both the academic and public community in measuring and modeling systemic risk. This article introduces a new framework for measuring systemic risk by using a risk-adjusted balance sheet approach. In this regard, the analysis of 21 largest commercial banks operating in 7 countries from Central and Eastern Europe, shows potential risk which could threaten all the financial system. The paper concludes new directions for measuring systemic risk by using Merton model. It shows how risk management tools can be applied in new ways to measure and analyze systemic risk in European banking system.

Suggested Citation

  • Renata Karkowska, 2013. "Instability In The Cee Banking System. Evidence From The Recent Financial Crisis," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5(4), pages 535-547, December.
  • Handle: RePEc:jes:wpaper:y:2013:v:5:i:4:p:535-547
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    File URL: http://www.ceswp.uaic.ro/articles/CESWP2013_V4_KAR.pdf
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    References listed on IDEAS

    as
    1. Pesaran, M. Hashem & Schuermann, Til & Treutler, Bjorn-Jakob & Weiner, Scott M., 2006. "Macroeconomic Dynamics and Credit Risk: A Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1211-1261, August.
    2. Dale F. Gray & Carlos J. García & Leonardo Luna & Jorge E. Restrepo, 2011. "Incorporating Financial Sector Risk Into Monetary Policy Models: Application to Chile," Central Banking, Analysis, and Economic Policies Book Series,in: Rodrigo Alfaro (ed.), Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 6, pages 159-197 Central Bank of Chile.
    3. Renzo G Avesani & Jing Li & Antonio Garcia Pascual, 2006. "A New Risk Indicator and Stress Testing Tool; A Multifactor Nth-to-Default CDS Basket," IMF Working Papers 06/105, International Monetary Fund.
    4. Lehar, Alfred, 2005. "Measuring systemic risk: A risk management approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2577-2603, October.
    5. Monica Billio & Mila Getmansky & Andrew W. Lo & Loriana Pelizzon, 2010. "Econometric Measures of Systemic Risk in the Finance and Insurance Sectors," NBER Chapters,in: Market Institutions and Financial Market Risk National Bureau of Economic Research, Inc.
    6. Kohara, Miki & Kamiya, Yusuke, 2011. "Do Working Mothers Reduce Their Home Production?," Economic Review, Hitotsubashi University, vol. 62(4), pages 342-355, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    systemic risk; Merton model; financial crisis; banking system Romania;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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