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The Volatility of European Banking Systems: A Two-Decade Study

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  • Francesco Vallascas

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  • Kevin Keasey

    ()

Abstract

This paper examines the trends and composition of volatility across European banking systems from January 1988 to December 2010. While there is no evidence of a long-term trend in the average level of banking system volatility, there is a change in its composition resulting from the growing importance of International and European nonfinancial components, especially in the largest banking systems. We argue that the changing composition of banking system volatility is the effect of a long-term integration process (with a growing importance of cross-border activities) that has not been influenced by the introduction of the Euro. Our results highlight the increasing vulnerability of the European banking systems to International and European shocks and an increasing likelihood of cross-border banking crises, and the need for regulatory reforms that focus on effective cross-border crisis management and resolution so as to safeguard the systemic stability of European banking in the near future. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Francesco Vallascas & Kevin Keasey, 2013. "The Volatility of European Banking Systems: A Two-Decade Study," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(1), pages 37-68, February.
  • Handle: RePEc:kap:jfsres:v:43:y:2013:i:1:p:37-68
    DOI: 10.1007/s10693-011-0122-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Banking system volatility; European banking; Financial integration; G21; G28;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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