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Is bank default risk systematic?

Franco Fiordelisi () and David Marques-Ibanez ()

Journal of Banking & Finance, 2013, vol. 37, issue 6, 2000-2010

Abstract: We evaluate the impact of commonly used indicators of bank distress on broad (i.e. sector and country) risks. This issue deserves special attention in the banking industry where there is a strong degree of interconnectedness among institutions and the default of a single bank may cause a cascading failure, which could potentially bankrupt the entire system. Using several measures of individual bank risk our results show that these measures have a direct impact on European banking (i.e. systemic) stock market risk. We also provide strong evidence suggesting that, for listed banks, default risk tends to be systematic (i.e. non-diversifiable).

Keywords: Systematic risk; Default risk; Banking (search for similar items in EconPapers)
JEL-codes: G12 G21 G32 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:6:p:2000-2010

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