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Handbook on Systemic Risk by Joseph A. Langsam, Jean-Pierre Fouque

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10

Analyzing Systemic Risk of the European Banking Sector

Viral V. Acharya and Sascha Steffen

Abstract Since the summer of 2007, the financial system has faced two major systemic crises. European banks have been at the center of both crises, particularly of the European sovereign debt crisis. This chapter analyzes the systemic risk of European banks across both crises exploiting the specific institutional nature of the European banking system. We employ the “Systemic Expected Shortfall” concept developed in Acharya et al. (2010) which creates a systemic risk index among financial institutions based on their individual contribution to the capital shortfall of the financial system. We analyze which banks are most systemic in Europe using this measure ...

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