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Bankovní sektor a státní riziko v Evropské unii

Banking Sector and Sovereign Risk in Euroepan Union

Jan Bruha () and Evžen Kočenda ()

Politická ekonomie, 2018, vol. 2018, issue 3, 366-383

Abstract: We analyze and quantify link between quality of the banking sector and sovereign risk in the states of the European Union (EU) using data over 1999-2014. We employ two market-based measures of the sovereign risk along with several empirically and theoretically motivated variables that characterize banking sector. We perform Bayesian estimations on several panels of countries. Our results show that higher ratio of the non-performing loans represents the most important industry-specific variable that is linked with a heightened rate of the sovereign risk. On the other hand, findings related to the size and depth of the banking sector, along with the capital adequacy ratio, are less clear-cut. Higher penetration of the foreign banks and higher degree of competition characterize a diversified structure of the banking industry that seems to be beneficial for the banking sector stability and is linked with lower sovereign risk.

Keywords: banking sector; European Union; financial stability; global financial crisis; sovereign risk (search for similar items in EconPapers)
JEL-codes: C23 E58 F15 G21 G28 H63 (search for similar items in EconPapers)
Date: 2018
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