European bank credit risk transmission during the credit Suisse collapse

Ramzi Nekhili, Matteo Foglia and Elie Bouri

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: The effect of Credit Suisse collapse on the credit risk spillover across banks is understudied and unclear. Using the tail-event and network dynamics framework on weekly data covering 15 large European banks from March 11, 2020 to March 28, 2023, we show that the credit risk has a strong spillover effect on major banks, increasing systemic risk significantly after the collapse of Credit Suisse. This is notable for non-EU (Swiss and UK) banks in the post-collapse era. The findings are useful for policymakers and regulators concerned with contagious credit risk and the stability of the banking sector under extreme events.

Keywords: European bank credit risk; Credit default swap (CDS); Credit Suisse collapse; Tail-event driven NETwork; Shutdown of silicon valley bank (search for similar items in EconPapers)
JEL-codes: G01 G15 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008243

DOI: 10.1016/j.frl.2023.104452

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