Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208227
Authors: 
Breckenfelder, Johannes
Schwaab, Bernd
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2193
Abstract: 
We study spillovers from bank to sovereign risk in the euro area using difference specifications around the European Central Bank's release of stress test results for 130 significant banks on October 26, 2014. We document that following this information release bank equity prices in stressed countries declined. Surprisingly, bank risk in stressed countries was not absorbed by their sovereigns but spilled over to non-stressed euro area sovereigns. As a result, in non-stressed countries, the co-movement between sovereign and bank risk increased. This suggests that market participants perceived that bank risk is shared within the euro area.
Subjects: 
bank-sovereign nexus
risk spillovers
stress test
European Central Bank
Comprehensive Assessment
JEL: 
C68
F34
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3298-1
Document Type: 
Working Paper

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