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European bank credit risk transmission during the credit Suisse collapse

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  • Nekhili, Ramzi
  • Foglia, Matteo
  • Bouri, Elie

Abstract

The effect of Credit Suisse collapse on the credit risk spillover across banks is understudied and unclear. Using the tail-event and network dynamics framework on weekly data covering 15 large European banks from March 11, 2020 to March 28, 2023, we show that the credit risk has a strong spillover effect on major banks, increasing systemic risk significantly after the collapse of Credit Suisse. This is notable for non-EU (Swiss and UK) banks in the post-collapse era. The findings are useful for policymakers and regulators concerned with contagious credit risk and the stability of the banking sector under extreme events.

Suggested Citation

  • Nekhili, Ramzi & Foglia, Matteo & Bouri, Elie, 2023. "European bank credit risk transmission during the credit Suisse collapse," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008243
    DOI: 10.1016/j.frl.2023.104452
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    Cited by:

    1. Lim, Seo-Yeon & Choi, Sun-Yong, 2024. "Dynamic credit risk transmissions among global major industries: Evidence from the TVP-VAR spillover approach," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    European bank credit risk; Credit default swap (CDS); Credit Suisse collapse; Tail-event driven NETwork; Shutdown of silicon valley bank;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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