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The Vienna Initiative as a Signaling Mechanism to Disrupt the Banking Doom Loop

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  • Christian Glocker

    (WIFO)

  • Thomas Url

    (WIFO)

Abstract

We investigate the emergence of the Vienna Initiative (VI) as a public-private partnership established in response to the global financial crisis, and assess its short-term impact on the risk metrics of Western European banks. Our findings suggest that negative herding behavior toward certain banks can be associated with their decision to participate in the initiative. Banks with weaker balance sheet fundamentals showed a higher likelihood of participation. The measures implemented through the VI proved effective in curbing risk transmission within the network of participating banks, underscoring a strong signaling effect on investor sentiment. Our findings underscore the value of coordinated information disclosure and conditional support in curbing short-run risk transmission.

Suggested Citation

  • Christian Glocker & Thomas Url, 2025. "The Vienna Initiative as a Signaling Mechanism to Disrupt the Banking Doom Loop," WIFO Working Papers 718, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2025:i:718
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