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Determinants of banking system fragility: a regional perspective

Hans Degryse (), Muhammad Ather Elahi and María Fabiana Penas

No 1567, Working Paper Series from European Central Bank

Abstract: We study the role of regional banking system characteristics for regional banking system fragility in Asia, Europe, Latin America and the US. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid assets, are better capitalized, and when regional banking systems are more competitive. For Asia and Latin-America, a greater presence of foreign banks and more wholesale funded banks also reduces regional banking fragility. In contrast, regional banking fragility increases in foreign bank presence and wholesale funding in the US. We further investigate the possibility of contagion across regions. We find that the contagion effects of Europe and the US on Asia and Latin America are significantly higher compared to the effect of Asia and Latin America among themselves. Finally, the impact of cross-regional contagion is attenuated when the host region has a more liquid and more capitalized banking sector. JEL Classification: G15, G20, G29

Keywords: Banking system stability; cross-regional contagion; financial integration (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-lam, nep-sea and nep-ure
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Related works:
Working Paper: Determinants of Banking System Fragility: A Regional Perspective (2012) Downloads
Working Paper: Determinants of Banking System Fragility: A Regional Perspective (2012) Downloads
Working Paper: Determinants of Banking System Fragility: A Regional Perspective (2012) Downloads
Working Paper: Determinants of Banking System Fragility: A Regional Perspective (2012) Downloads
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