Systemic risk in the Scandinavian banking sector

Axel Per Hedström, Gazi Uddin, Md Lutfur Rahman and Bo Sjö

International Journal of Finance & Economics, 2024, vol. 29, issue 1, 581-608

Abstract: The banking sectors in the Scandinavian countries are highly concentrated, typically undercapitalised and they have suffered through several crises since the 1990s. This article analyses the systemic risk in Denmark, Norway and Sweden focusing on the co‐dependence in the tails of equity returns of an individual bank and the overall banking system. We use, partly in a new way, conditional cross‐quantilograms (CQs) for this purpose. We find that the CQs are positive and statistically significant in the low and high quantiles indicating that the Scandinavian banks are systemically linked. The low‐quantile dependence is relatively stronger compared with the magnitude of dependence in the other quantiles. These results hold even after controlling for equity market volatility and economic policy uncertainty. We further observe that the systemic risk was insignificant from the early—2000 to the outbreak of the global financial crisis (GFC). However, after the GFC and the euro zone crisis, the systemic risk has increased substantially. Finally, we find that bank size has a positive relationship with systemic risk (low‐quantile dependence) while return on asset and loan to deposit ratio exhibit a negative influence. Furthermore, these relationships are asymmetric across quantiles.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/ijfe.2699

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: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:29:y:2024:i:1:p:581-608

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().