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9 - Systemic Risk of European Banks

Regulators and Markets*

Published online by Cambridge University Press:  09 August 2018

By
Maarten R.C. van Oordt  and
Chen Zhou
Edited by
Paul Mizen ,
Margarita Rubio  and
Philip Turner
Paul Mizen
Affiliation:
University of Nottingham
Margarita Rubio
Affiliation:
University of Nottingham
Philip Turner
Affiliation:
Universität Basel, Switzerland
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Summary

Regulatory rules may have different impacts on risk-taking by individual banks and on banks’ systemic risk levels. That is why implementing prudential rules and policies requires careful consideration of their impact on bank risk and systemic risk. This chapter assesses whether market-based measures of systemic risk and recent regulatory indicators provide similar rankings on the systemic importance of large European banks. We find evidence that regulatory indicators of systemic importance are positively related to systemic risk. In particular, banks with higher scores on regulatory indicators have a stronger link to the system in the event of financial stress, rather than having a higher level of bank risk.

Type
Chapter
Information
Macroprudential Policy and Practice , pp. 205 - 224
Publisher: Cambridge University Press
Print publication year: 2018

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