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Robust Clustering of EU Banking Data

  • Jessica CariboniEmail author
  • Andrea Pagano
  • Domenico Perrotta
  • Francesca Torti
Conference paper
  • 2k Downloads
Part of the Studies in Classification, Data Analysis, and Knowledge Organization book series (STUDIES CLASS)

Abstract

In this paper we present an application of robust clustering to the European union (EU) banking system. Banks may differ in several aspects, such as size, business activities and geographical location. After the latest financial crisis, it has become of paramount importance for European regulators to identify common features and issues in the EU banking system and address them in all Member States (or at least those of the Euro area) in a harmonized manner. A key issue is to identify using publicly available information those banks more involved in risky activities, in particular trading, which may need to be restructured to improve the stability of the whole EU banking sector. In this paper we show how robust clustering can help in achieving this purpose. In particular we look for a sound method able to clearly cut the two-dimensional space of trading volumes and their shares over total assets into two subsets, one containing safe banks and the other the risky ones. The dataset, built using banks’ balance sheets, includes 245 banks from all EU27 countries, but Estonia, plus a Norwegian bank. With appropriate parameters, the TCLUST routine could provide better insight of the data and suggest proper thresholds for regulators.

Keywords

European Union Bayesian Information Criterion Total Asset Banking Sector Restriction Factor 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer International Publishing Switzerland 2015

Authors and Affiliations

  • Jessica Cariboni
    • 1
    Email author
  • Andrea Pagano
    • 1
  • Domenico Perrotta
    • 2
  • Francesca Torti
    • 2
  1. 1.European Commission, Joint Research CentreInstitute for the Protection and Security of the Citizen, Financial and Economic Analysis UnitIspra siteItaly
  2. 2.European Commission, Joint Research CentreInstitute for the Protection and Security of the Citizen, Global Security and Crisis Management UnitIspra siteItaly

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