Bank solvency and liquidity risk in different banking profiles – the study of European banking sectors
Bank solvency and liquidity risk in different banking profiles – the study of European banking sectors

Summary/Abstract: The goal of this study is to identify empirically how the banking size and activities affect directly the bank solvency and liquidity risk in different banking profiles. Through a dataset that covers 4250 European banks, spanning the period of 1996-2011, and the methodology of panel regression, I examine the implications of banks’ size (in terms of assets and equity) and the nature of the business activity on the stability of European banking sector. The research questions are: whether the biggest banks, included in the SIFIs group are the most unstable link of systemic risk, and whether they manifest themselves as spreading and growing instability in the banking sector. To show the heterogeneity of risk determinants, the sample of banks was divided as follows: large/small assets and large/small equity. The findings have implications for both bank risk management and regulators. This paper advances the agenda of making macroprudential policy operational.

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