Australian banking risk: evidence from share prices

Marianne Gizycki and Mark E. Levonian

No 94-03, Working Papers in Applied Economic Theory from Federal Reserve Bank of San Francisco

Abstract: We use share price data to calculate bank asset volatilities, market capital-asset ratios, and the public-sector depositor protection liability for Australia. The results show that the average capital ratio for the Australian banking sector has risen over the past decade, while the riskiness of bank assets has increased slightly. An examination of the relationship between asset volatility and bank capital implies that riskier banks have tended to maintain higher capital ratios, with a similar positive relationship between the two variables over time at individual banks. We find that the economic value of Australian depositor protection is extremely small.

Keywords: Banks and banking - Australia; Australia; Risk; Bank stocks; Stock - Prices (search for similar items in EconPapers)
Date: 1994
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