Factors influencing bank risk in Europeevidence from the financial crisis

  1. Baselga Pascual, Laura
  2. Trujillo-Ponce, Antonio
  3. Cardone-Riportella, Clara
Journal:
Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

ISSN: 1988-8767

Year of publication: 2013

Issue: 721

Type: Working paper

More publications in: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

Abstract

In this paper we use a dynamic panel data model to analyze bank-specific and macroeconomic determinants of bank risk for a large sample of commercial banks operating in the European Union. The selected time span, from 2005 to 2011, considers the impact of the recent financial and economic crisis on the Eurozone banking system. Our results indicate that capitalization, profitability, efficiency and liquidity are negatively and significantly related to bank risk. We also find that less competitive markets, lower interest rates and a context of economic crisis (with falling GDP and rising inflation rates) increase bank risk.