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Banking System Stability: A Cross-Atlantic Perspective


Philipp Hartmann


European Central Bank (ECB); Centre for Economic Policy Research (CEPR) - International Macroeconomics

Stefan Straetmans


University of Maastricht - Limburg Institute of Financial Economics (LIFE)

Casper G. De Vries


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute)

September 2005

ECB Working Paper No. 527

Abstract:     
This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks' equity prices. We use new tools available from multivariate extreme value theory to estimate individual banks' exposure to each other ("contagion risk") and to systematic risk. By applying structural break tests to those measures we study whether capital markets indicate changes in the importance of systemic risk over time. Using data for the United States and the euro area, we can also compare banking system stability between the two largest economies in the world. For Europe we assess the relative importance of cross-border bank spillovers as compared to domestic bank spillovers. The results suggest, inter alia, that systemic risk in the US is higher than in the euro area, mainly as cross-border risks are still relatively mild in Europe. On both sides of the Atlantic systemic risk has increased during the 1990s.

Number of Pages in PDF File: 95

Keywords: Banking, Systemic Risk, Asymptotic Dependence, Multivariate Extreme Value Theory, Structural Change Tests

JEL Classification: G21, G28, G29, G12, C49

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Date posted: October 19, 2005  

Suggested Citation

Hartmann, Philipp and Straetmans, Stefan and de Vries, Casper G., Banking System Stability: A Cross-Atlantic Perspective (September 2005). ECB Working Paper No. 527. Available at SSRN: http://ssrn.com/abstract=804465

Contact Information

Philipp Hartmann (Contact Author)
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
(49 69) 1344 7356 (Phone)
(49 69) 1344 8553 (Fax)
Centre for Economic Policy Research (CEPR) - International Macroeconomics
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Stefan Straetmans
University of Maastricht - Limburg Institute of Financial Economics (LIFE) ( email )
Faculty of Economics - Finance Department
P.O. Box 616
6200 MD Maastricht
Netherlands
+31 43 388 3679 (Phone)
+31 43 388 4875 (Fax)
Casper De Vries
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 8956 (Phone)
+31 10 408 9147 (Fax)
Tinbergen Institute
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
+31 10 408 8956 (Phone)
+31 10 408 9147 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
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