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

  • Francesco Vallascas

    ()

  • Kevin Keasey

    ()

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    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

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    File URL: http://hdl.handle.net/10.1007/s10693-011-0122-y
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    Article provided by Springer in its journal Journal of Financial Services Research.

    Volume (Year): 43 (2013)
    Issue (Month): 1 (February)
    Pages: 37-68

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    Handle: RePEc:kap:jfsres:v:43:y:2013:i:1:p:37-68
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102934

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