Bank to sovereign risk spillovers across borders: evidence from the ECB’s Comprehensive Assessment

Johannes Breckenfelder and Bernd Schwaab

No 2193, Working Paper Series from European Central Bank

Abstract: We study spillovers from bank to sovereign risk in the euro area using difference specifications around the European Central Bank’s release of stress test results for 130 significant banks on October 26, 2014. We document that following this information release bank equity prices in stressed countries declined. Surprisingly, bank risk in stressed countries was not absorbed by their sovereigns but spilled over to non-stressed euro area sovereigns. As a result, in non-stressed countries, the co-movement between sovereign and bank risk increased. This suggests that market participants perceived that bank risk is shared within the euro area. JEL Classification: C68, F34

Keywords: bank-sovereign nexus; Comprehensive Assessment; European Central Bank; risk spillovers; stress test (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-cba and nep-eec
Note: 1125999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2193.en.pdf (application/pdf)

Related works:
Journal Article: Bank to sovereign risk spillovers across borders: Evidence from the ECB’s Comprehensive Assessment (2018)
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:ecb:ecbwps:20182193

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().