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European banks after the global financial crisis: a new landscape

  • Marisa Basten
  • Antonio Sánchez Serrano
Original Article
  • 234 Downloads

Abstract

The global financial crisis has created a different macroeconomic and regulatory environment for banks. In this paper, using market-based and structural indicators, we try to provide a narrative for the new landscape in which European banks operate and, at least partially, to answer the question of whether banks are now safer. To that purpose, we separately consider three periods: pre-crisis (before October 2007), crisis and post-crisis (after July 2012), over a sample of 32 banks. Our analysis shows that, after the global financial crisis, there has been a decrease in the value of market-based indicators, which, nonetheless, still remain higher than pre-crisis levels. That would mark banks as less safe than before the global financial crisis. When turning to structural indicators, our findings do not align with those from market-based indicators, as they would qualify banks as safer now. This contrast may be signalling that from a pre-crisis period characterised by high risks in the banking sector which were not priced by market participants, we may have moved to a period of lower risks in the banking sector but with market participants fully aware of them. There are significant differences between large- and medium-sized banks, which could be due to the persistence of a certain Too-Big-To-Fail assumption only for larger banks. Finally, market-based indicators tend to suggest that the bail-in and the leverage ratio have been the two pieces in the regulatory reform with the largest impact.

Keywords

Banks Basel III Global financial crisis Leverage Risk-weight densities 

JEL Classification

G01 G32 G21 K22 

Notes

Acknowledgements

The views expressed in this paper are those of the authors and do not necessarily represent the views of the European Systemic Risk Board (ESRB), any of its Member Institutions or the ESRB Secretariat. Useful comments from colleagues at the ESRB Secretariat are gratefully acknowledged. All remaining errors are ours.

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Copyright information

© Macmillan Publishers Ltd., part of Springer Nature 2018

Authors and Affiliations

  1. 1.European Systemic Risk BoardFrankfurt am MainGermany

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