We examine the cyclical behaviour of European bank capital buffers using an unbalanced panel data set comprising eight years (1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004) of bank balance sheet data for commercial, savings and co-operative banks. Controlling for other potential determinants of bank capital, we find that capital buffers of the banks in the accession countries (RAM10) have a significant positive relationship with the cycle, while for banks operative in the EU15 and the EA and the combined EU25 the relationship is significantly negative. We also find fairly slow speeds of adjustment, with around two-thirds of the correction towards desired capital buffers taking place each year. We further distinguish by type and size of bank, finding that capital buffers of commercial and savings banks, and also of a sub-sample of large banks, exhibit negative co-movement. Co-operative banks and smaller banks on the other hand, tend to exhibit positive cyclical co-movement.

a b s t r a c tBuilding an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance-sheet data from 1986 to 2008, we examine the relationship between short-term capital buffer and portfolio risk adjustments. Our estimations indicate that the relationship over the sample period is a positive two-way relationship. Moreover, we show that the management of such adjustments is dependent on the degree of bank capitalization. Further investigation through time-varying analysis reveals a cyclical pattern in the uncovered relationship: negative after the 1991/1992 crisis, and positive before 1991 and after 1997.

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Making use of ten years of daily data, this paper examines whether banking sector co-movements between the three largest Central and Eastern European Countries (CEECs) can be attributed to contagion or to interdependence. Our tests based on simple unadjusted correlation analysis uncover evidence of contagion between all pairs of countries. Adjusting for market volatility during turmoil, however, produces different results. We then find contagion from the Czech Republic to Hungary during this time, but all other cross-market co-movements are rather attributable rather to strong cross-market linkages. In addition, we construct a set of dummy variables to try to capture the impact of macroeconomic news on these markets. Controlling for own-country fundamentals, we discover that the correlations diminish between the Czech Republic and Poland, but that coefficients for all pairs remain substantial and significant. Finally, we address the problem of simultaneous equations, omitted variables and heteroskedasticity, and adjust our data accordingly. We confirm our previous findings. Our tests provide evidence in favour of parameter instability, again signifying the existence of contagion arising from problems in the Czech Republic affecting Hungary during much of 1996.