Banking System Stability: A Cross-Atlantic Perspective

87 Pages Posted: 20 Dec 2005 Last revised: 20 Jun 2021

See all articles by Philipp Hartmann

Philipp Hartmann

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

Stefan Straetmans

Maastricht University ; University of Antwerp - Faculty of Applied Economics

Casper G. de Vries

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

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks%u2019 equity prices. We use new tools available from multivariate extreme value theory to estimate individual banks%u2019 exposure to each other (%u201Ccontagion risk%u201D) and to systematic risk. Moreover, 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. Finally, 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.

Suggested Citation

Hartmann, Philipp and Straetmans, Stefan and De Vries, Casper, Banking System Stability: A Cross-Atlantic Perspective (October 2005). NBER Working Paper No. w11698, Available at SSRN: https://ssrn.com/abstract=827974

Philipp Hartmann (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
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(49 69) 1344 7356 (Phone)
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Centre for Economic Policy Research (CEPR) - International Macroeconomics

London
United Kingdom

Stefan Straetmans

Maastricht University ( email )

Tongersestraat 53
Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.stefanstraetmans.com

University of Antwerp - Faculty of Applied Economics ( email )

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Antwerp, B-2000
Belgium

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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