Economics at your fingertips  

Systematic risk factors and bank failures

Junjie Sun, Deming Wu and Xinlei Zhao

Journal of Economics and Business, 2018, vol. 98, issue C, 1-18

Abstract: We investigate the impact on bank failures of two systematic risk factors—the stress in the interbank funding market and conditions in the local housing market—in the two banking crises during the period from 1985 to 2011. We find that local housing market conditions had a stronger relation with bank failures during the first episode than during the second episode. By contrast, the interbank funding market condition only weakly helped to predict bank failures before 2005, but it had a very strong impact on bank failures during the latest banking crisis. Therefore, banking crises seemed to be driven by episode-specific risk factors. Accordingly, even though it is common wisdom at present that overall banking risk is more than just the sum of risks at the individual bank level and that macro-prudential overlay is important in bank regulation, finding the right systematic risk factors for the next banking crisis or correctly gauging their impact on bank failures might be challenging.

Keywords: Bank failures; Systematic risk factors; TED spread; Local housing market conditions; Interbank funding market conditions (search for similar items in EconPapers)
JEL-codes: G21 G28 R10 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jeconbus.2018.05.001

Access Statistics for this article

Journal of Economics and Business is currently edited by Kenneth J. Kopecky

More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-20
Handle: RePEc:eee:jebusi:v:98:y:2018:i:c:p:1-18