Sovereign Risk Spillover Effects and the Role of Systemically Important Financial Institutions
Author | : Haoshen Hu |
Publisher | : |
Total Pages | : 30 |
Release | : 2016 |
ISBN-10 | : OCLC:1305908607 |
ISBN-13 | : |
Rating | : 4/5 (07 Downloads) |
Download or read book Sovereign Risk Spillover Effects and the Role of Systemically Important Financial Institutions written by Haoshen Hu and published by . This book was released on 2016 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyse two-way spillover effects between sovereign ratings and bank ratings across 17 Eurozone countries for the period 2002-2013. We show that sovereign rating actions including watchlist placements and outlooks have a significant impact on bank ratings. During the financial crisis, downgrade spillovers from sovereigns to systematically important financial institutions (SIFIs) are stronger than spillovers to non-SIFIs. Moreover, we provide evidence on the existence of a bank-to-sovereign rating transmission channel. Downgrades of SIFIs increase the probability of multiple-notch downgrades of sovereign ratings. Dividing the sample into PIIGS and non-PIIGS subsets, we find bank-to-sovereign spillovers to exist only in the PIIGS subsample.