We would like to invite all enthusiasts and finance researchers to the February 2024 Kozminski University Finance Research Seminar - Impact of Systemic Risk on Total Capital Ratios of Banks in Europe During Public Debt Crisis, Brexit, Covid-19 Pandemic and the War in Ukraine
When? Thursday, 25 April 2024, 5:15 PM (CET)
Where? - D200 or online via Microsoft Teams (MS Teams link will be sent following registration below)
Abstract:
The paper presents a cross-sectional analysis of systemic risk and its impact on the total capital ratios (TCRs) of 120 systemically important European banks, combining the panel vector autoregression models (VAR) with ΔCoVaR-based systemic risk measurement, investigating the intertwined processes involving a set of 40 exogenous and endogenous variables. The study covers the European public debt crisis, Brexit, the COVID-19 pandemic, and the war in Ukraine. The results offer macroprudential insights. We confirm that in all turbulent periods, systemic risk has a significant positive effect on the TCR in the periods leading to crisis and a strong negative effect in its aftermath. We also find that systemic risk modifies the impact of three macroeconomic indicators (GDP growth, current accounts balance, and public debt), reversing the direction of this impact on the TCR. We further find that banks' ability to build robust capital no longer depends on the housing market dynamics, even when intertwined with a systemic crisis. In contrast, the effect of the US stock market on the TCR is strong and positive in calm periods and equally strong but negative when coupled with systemic turbulence. Thus, our results indicate spillovers of systemic-risk-induced effects on the TCR between the US and Europe for both listed and unlisted banks. Importantly, we present empirical evidence confirming that the war in Ukraine affects banks’ TCRs similarly to previous crises.
Speaker
Assistant Professor
Department of Financial Investments and Risk Management
Wrocław University of Economics and Business
Dr. Marta Anita Karaś is an assistant professor at the Department of Financial Investments and Risk Management at the Wrocław University of Economics and Business in Poland. She is the recipient of numerous research grants, including the Preludium grant from the National Science Centre (NCN). Her research interests are in systemic risk measures and financial stability. She has received an award from the National Bank of Poland in recognition for work on systemic risk modelling.