TY - UNPB
T1 - Determinants of Banking System Fragility
T2 - A Regional Perspective
AU - Degryse, H.A.
AU - Elahi, M.A.
AU - Penas, M.F.
N1 - This is also CentER Discussion Paper 2012-015
Pagination: 50
PY - 2012
Y1 - 2012
N2 - Abstract: Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. 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 also reduces regional banking fragility. We further investigate the possibility of contagion within and across regions. Within region banking contagion is important in all regions but it is substantially lower in the developed regions compared to emerging market regions. For cross-regional contagion, 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.
AB - Abstract: Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. 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 also reduces regional banking fragility. We further investigate the possibility of contagion within and across regions. Within region banking contagion is important in all regions but it is substantially lower in the developed regions compared to emerging market regions. For cross-regional contagion, 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.
KW - Banking system stability
KW - cross-regional contagion
KW - financial integration
M3 - Discussion paper
VL - 2012-009
T3 - EBC Discussion Paper
BT - Determinants of Banking System Fragility
PB - EBC
CY - Tilburg
ER -