Interconnectedness and Systemic Risk of European Banks Over the Recent Crises

The recent financial turmoil has stimulated a rich debate in the banking and financial literature on the identification of the determinants of systemic risk, as well as of devices to forecast and prevent crises. In this paper, we explore the contribution of corporate variables on the systemic risk in a CoVar approach, as recently proposed by Adrian and Brunnermeier (2010, 2011, 2014). Using a unique sample of 141 European banks belonging to 24 European countries, continuously listed from 2006Q1 to 2012Q4, we investigate the impact of corporate variables over several regimes that characterised the European context in recent years, namely the subprime crisis (2007Q3-2008Q3), the European Great Financial Depression (2008Q4-2010Q2) and the sovereign debt crisis (2010Q3-2012Q4). There is evidence that size has not played a significant role in spreading systemic risk, the contrary holds true for maturity mismatch. However, the nature and the intensity of these two determinants vary across the three crises