The performance of the euro area banking system: the pandemic in perspective

Maria-Eleni Agoraki, Georgios Kouretas and Francisco Nadal Simone ()
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Francisco Nadal Simone: University of Luxembourg-UBI

Review of Quantitative Finance and Accounting, 2025, vol. 65, issue 1, No 2, 39-69

Abstract: Abstract This research explores the performance of the euro area banking system between 2002:Q3 and 2021:Q1 using banks’ return on assets as a gauge. It finds that despite the Covid-19 pandemic, the banking sector’s performance has not been negatively affected in a statistically significant way. In addition, it shows that while the global financial crisis and the sovereign crisis both introduced significant uncertainty in the performance of the banking system in the euro area, such uncertainty has not been replicated during the worst part of the Covid-19 pandemic. From a purely technical viewpoint, uncertainty in the banking system’s performance in the euro area highlights the relevance of using methodological approaches that control for the endogeneity of most bank-specific determinants of return on assets and that are robust to changes in unconditional variance due to regime changes, to future random shocks or both.

Keywords: Euro area bank performance; Covid-19 pandemic; Bank resilience; Canonical models; Time-varying parameters models; Markov-switching models (search for similar items in EconPapers)
JEL-codes: E51 E58 G14 G21 G28 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-023-01180-1

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