Bank to sovereign risk spillovers across borders: Evidence from the ECB’s Comprehensive Assessment

We study risk contagion from the banking to the sovereign sector in the euro area. Our empirical findings are based on difference specifications around the European Central Bank's announcement of the results of its Comprehensive Assessment of 130 significant banks, on 26 October 2014. This information shock led to a reassessment of bank risk, and, consequently, of sovereign risk. Strikingly, sovereign CDS spreads also increased for countries which did not experience adverse banking sector surprises. We argue that those countries provided a backstop to foreign banks, implying that the euro area bank-sovereign nexus has an important cross-border dimension.

• Publication year

  2018

• Venue

  Journal of Empirical Finance

• Publication date

  2018-12-01

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.1016/J.JEMPFIN.2018.08.001
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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