Transition Studies Review

, Volume 19, Issue 3, pp 339–346 | Cite as

Regulatory Problems of Commercial Banks in the Context of the European Sovereign Crisis

  • Edward Sandoyan
  • Gagik GrigoryanEmail author
Transition Finance and Banking Research


This study aims to find whether regulatory measurement of banking risks proposed by the Basel Committee provide a framework that allows an adequate reflection of these risks in banks’ capital requirements. The analysis is carried through the prism of financial crisis that started in 2007 and current sovereign crisis in some European countries. In the study we investigated the problems attached to Standardized Approach and risk measurement of a financial instrument based on the rating of issuer. As a result we revealed contradiction in the current regulation, according to which risk free assets provide a better return than riskier assets. We found evidences of the gaps attached to Standardized Approach, which in current sovereign crisis can become problematic not only for commercial banks, but also for the issuers of financial instruments in which commercial banks have investments. Finally, we offered a different method of risk measurement that, we argue, provides a better measurement of banking risks as such.


Financial crisis Basel Sovereign crisis Banking Regulation 

JEL Classifications

G01 G15 G28 


  1. Blundell-Wignall A (2012) Solving the financial and sovereign debt crisis in Europe. OECD J Financial Mark TrendsGoogle Scholar
  2. Caruana J (2011) Financial and real sector interactions: enter the sovereign ex machina. BISGoogle Scholar
  3. Committee on the Global Financial System (2011) The impact of sovereign credit risk on bank funding conditions, BISGoogle Scholar
  4. Cullen AJ (2011) Why Do Banks Fail?. Available at SSRN: or
  5. European Banking Authority (2011) EU-wide stress test results, p 24.
  6. Hannoun H (2011) Sovereign risk in bank regulation and supervision: where do we stand? BISGoogle Scholar
  7. McCauley R, White W (1997) The euro and European financial markets. In: Masson P, Krueger T, Turtelboom B (eds) EMU and the international monetary system. IMF, Washington, DC, pp 352–353Google Scholar
  8. Shin HS (2010) Risk and Liquidity. Oxford University Press, OxfordGoogle Scholar
  9. Vause N, von Peter G (2011) Euro area sovereign crisis drives global financial markets. BISGoogle Scholar

Copyright information

© Springer-Verlag Wien 2012

Authors and Affiliations

  1. 1.Finance, Monetary Circulation and Credit DepartmentRussian-Armenian Slavonic UniversityYerevanArmenia

Personalised recommendations