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Sovereign Risk and Deposit Dynamics: Evidence from Europe
Author:
Mr. David A. Grigorian
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Mr. Vlad Manole null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 145
Language:
English
Publication Date:
22 Jul 2016
DOI:
https://doi.org/10.5089/9781498381833.001
ISBN:
9781498381833
ISSN:
1018-5941
Pages:
24
Keywords:
WP; bank; depositor; deposit; bank efficiency; Sovereign risk; market discipline; bank deposits; European crisis; bank depositor; market share; bank-level indicator; efficiency index; Deposit insurance; Commercial banks; Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The unprecedented expansion of sovereign balance sheets since the global financial crisis has given a new meaning to the term sovereign risk. Developments in Europe since early 2010 presented new challenges for the functioning of private banks in an environment of heightened sovereign risk. This paper uses an innovative way of measuring the perception of sovereign risk and its impact on deposit dynamics during 2006–11. Using an extension of a common market discipline framework, it shows that exposure to sovereign risk may have limited the ability of banks in Europe to attract deposits. The results are robust to inclusion of conventional measures of bank performance and the sector-wide holdings of foreign sovereign debt.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund