THE DETERMINANTS OF THE EUROPEAN BANKING CRISIS

Sana Zidi,Nessrine Hamzaoui,Boutheina Regaieg

doi:10.32479/ijefi.11225

Abstract

The fragility of the European banking system in recent years has motivated us to research on the main indicators that weigh on the soundness of its banking institutions and therefore deserves special attention from supervisors. Our study is based on 40 consolidated banking groups from 10 countries in Europe. We used binary logistic regression as an econometric model. We introduced accounting, macroeconomic, regulatory, legal and institutional variables. The results of our study confirm that doubtful credit is the main variable contributing to the birth of the European banking crisis.Keywords: banking crisis, binary Logit model, legal, regulatory and institutional environment.JEL Classifications: E58, C15, P48.DOI: https://doi.org/10.32479/ijefi.11225

Highlights

According to Angora (2009), empirical studies on the determinants and prediction of banking crises do not provide a consensus on the definition of the crisis and the factors behind it
Linicifort (2009) adds that the subprime crisis shows that bank failure has negative consequences on the economy
Since bank failure brings with it high costs to the economy, it is important to identify the factors that explain it, in order to prevent it

Summary

Introduction

According to Angora (2009), empirical studies on the determinants and prediction of banking crises do not provide a consensus on the definition of the crisis and the factors behind it. This is why the need to understand the formation of balances of banking crises has aroused within the community of researchers a wave of theoretical work on this issue. In another way, several researchers have been interested in the concept of banking crisis. It can be said that among the most cited factors of banking crisis are: unfavorable macroeconomic conditions (recession, inappropriate inflationary policy), the credit boom, the exchange rate regime, destabilizing external factors, liberalization Inadequate prudential supervision, weak institutions and noncompliance with legality (Angora, 2009)

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