Individual, Systematic and Systemic Risks in the Danish Banking Sector

Johannes K. Dreyer (), Peter A. Schmid and Victoria Zugrav
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Johannes K. Dreyer: Roskilde University, Roskilde, Denmark
Peter A. Schmid: FOM Hochschule für Oekonomie & Management, Essen, Germany
Victoria Zugrav: Roskilde University, Roskilde, Denmark

Czech Journal of Economics and Finance (Finance a uver), 2018, vol. 68, issue 4, 320-350

Abstract: This article discusses the relationship between micro-prudential variables and bank risk. For this purpose, we collect panel data on 21 Danish banks accounting for 88% of total market share in Denmark from 2000 to 2015 and reflect upon the contribution of these different variables to bank individual, systematic and systemic risks. Our results suggest that the factors size, capitalization, funding structure, organizational complexity and degree of market-based activities are key risk determinants. Moreover, we find evidence that the Danish case is relatively peculiar with respect to the effects of bank size and of degree of market-based activities: Bank size contributes positively to systematic and systemic risks, but not to individual risk. Degree of market-based activities contributes to counteract individual risk, but on the other hand intensifies systematic and systemic risks. The Danish case could be taken as an example for other small economies with a highly concentrated banking sector.

Keywords: individual risk; systematic risk; systemic risk; bank size; financial regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:68:y:2018:i:4:p:320-350

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