The Eurozone banking sector in the time of COVID-19: Measuring volatility connectedness

Foglia, Matteo; Addi, Abdelhamid; Angelini, Eliana

doi:10.1016/j.gfj.2021.100677

Cited by 35 publications

(15 citation statements)

References 72 publications

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“…As projected, the Covid-19 pandemic that hits all over the globe left a severe impact to businesses and the economy as a whole. Undoubtedly, the banking sector, which provides financing to economic sectors faced a direct impact from this situation due to the risk spillover effect (Foglia et al, 2022). The study found evidence that during the pandemic, non-performing financing was significantly higher than before the crisis.…”

Section: Discussionmentioning

confidence: 88%

Malaysian Household Debt: The Impact of Covid-19 on Non-Performing Financing

2022

MAR

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In Malaysia, the composition of total financing includes household and sectoral financing, in which household financing holds the most considerable portion of the pie. Despite the significant portion of household financing, the non-performing ratio is recognized among the lowest among other sectoral ratios. The recent Covid-19 pandemic however, has directly given a negative impact on both sectoral and household repayment in the country. This study explored the effect of Covid-19 on the relationship between household financing and non-performing financing, examining the different impacts on non-performing financing during and before the pandemic. Apart from household financing, the study included the impact of other sectoral financing, mainly those that largely contributed to the economy on non-performing financing. The study used 15-year monthly aggregate data spanning from April 2006 to April 2021. The results indicated that household financing significantly affected the non-performing financing. As anticipated, the finding revealed the non-performing financing was significantly higher during the pandemic relative to before the crisis. In response to this phenomenon, banks have become more stringent in granting financing particularly to households. Evidently, the interaction between Covid-19 and household financing exhibited an opposite effect on nonperforming financing before and during the pandemic.

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Section: Discussionmentioning

confidence: 88%

Malaysian Household Debt: The Impact of Covid-19 on Non-Performing Financing

2022

MAR

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“…The GFC create an environment that creates danger for banking stability and increases the risk (Chircusi 2008). Another such crisis is being witnessed in the form of the COVID-19 pandemic, which has impacted the ability of households and firms to repay their debt, which is expected to increase the credit risk of banks (Foglia et al 2022). It is expected that this trend will increase in the second half of 2021 and the first half of 2022 as the researchers will have access to more data on the pandemic and banking risk.…”

Section: Annual Publicationsmentioning

confidence: 99%

Risks measurement in banking: A bibliometric and content analysis

2022

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Banking risk has gained interest from researchers after the global financial crisis and implementation of Basel III norms. The present study performs a scientific bibliometric analysis of research on banking risk till data. Research has been conducted on five major types of banking risks -credit, operational, market, liquidity, and interest rate risk -from 967 publications on Scopus database from 1967 to 2021. The results suggest that the research in the area is dominated by the United States, the United Kingdom, and China. The publications in top journals in the domain of finance and economics are less, but the number has increased after 2008-2009. The paper also performs content analysis on top-cited papers of five risk categories to find major themes and theoretical, practical, and methodological contributions. These findings suggest scope for more research in risks other than credit and operating risks, as existing research is centred around modelling risk and predicting default rates. Researchers in the area should focus on programming and machine learning tools. Regarding policy implications, the research identifies key publications in risk modelling, which can be used as the basis of improved supervisory mechanisms and internal controls.

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“…As global banks are highly connected, the effects are further amplified by cross-country risk spillovers and contagion. Foglia, Addi, and Angelini (2021) reveal that global banks are highly interconnected in terms of volatility, reaching their 15-year maximum peak at the time of COVID-19. Moreover, the authors argue that the Eurozone banking system is too "interconnected to fail" because of heavy risk spillovers affecting banking stability.…”

Section: Cross-wavelet Transformmentioning

confidence: 99%

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

Bales

Burghof

2022

FREP

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PurposeThe paper examines the impact of COVID-19 on bank stock returns over various time scales and frequencies for 36 countries. Moreover, the authors look at the governments' responses to the corona crisis and examine its impact on bank stock returns.Design/methodology/approachThe paper applies continuous wavelet transformation to obtain robust estimates of the co-movement (coherency) between confirmed cases and bank stock returns over time and at different time scales. Furthermore, the authors apply fixed effects panel regression to examine the response of bank stocks to domestic COVID-19 policies.FindingsThe results indicate that the number of confirmed COVID-19 cases negatively impacts bank stock returns during different waves of the pandemic in the medium-run. However, there is only little dependence in the very short-run. Moreover, bank stock returns positively react to domestic COVID-19 polices. This demonstrates that governmental interventions not only reduce the spread of COVID-19 but are also able to thereby calm financial markets.Originality/valueThe application of wavelet methods to the field of economics and finance is relatively recent and allows the distinction between short-term and long-term effects. Standard econometric methods, in contrast, only operate within the time domain. This paper combines wavelet methods with conventional econometrics to answer the research question.

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The Eurozone banking sector in the time of COVID-19: Measuring volatility connectedness

Cited by 35 publications

References 72 publications

Malaysian Household Debt: The Impact of Covid-19 on Non-Performing Financing

Malaysian Household Debt: The Impact of Covid-19 on Non-Performing Financing

Risks measurement in banking: A bibliometric and content analysis

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

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