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International Banking and Country Risk Calculus: The Experience of Greek Banks in Southeastern Europe

Author

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  • Panayotis Kapopoulos

    (Risk Management Division, Emporiki Bank, Sophocleous 11 102 35, Athens, Greece.)

  • Sophia Lazaretou

    (Economic Research Department, Bank of Greece, 21E1, Venizelos Avenue, 102 50, Athens, Greece.)

Abstract

Between 1996 and 2003, emerging market economies experienced major financial crises with both high frequency and severity. Since then and until the recent bout of financial turbulence, the drop off in the frequency of such crises has been marked. However, the absence of a crisis episode does not mean that there are not some potential risks looking forward. In this paper, we use the theoretical framework of international banking and the country risk calculus in an effort to study the experience of Greek banks in Southeastern Europe over the past decade. This experience is the product of two factors, that is, value at risk and the probability of a sovereign risk event. We find that lending concentration is high. Using the capital asset pricing model and implementing a two-step identification process, we detect a diversification effect of this concentration risk.

Suggested Citation

  • Panayotis Kapopoulos & Sophia Lazaretou, 2011. "International Banking and Country Risk Calculus: The Experience of Greek Banks in Southeastern Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(4), pages 557-574, December.
    • Handle: RePEc:pal:compes:v:53:y:2011:i:4:p:557-574
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    Cited by:

    1. Giorgos Argitis & Stella Michopoulou, 2013. "Studies in Financial Systems No 4 Financialization and the Greek Financial System," FESSUD studies fstudy04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    2. Papafilis, Michalis-Panayiotis & Psillaki, Maria & Margaritis, Dimitris, 2015. "Interdependence between Sovereign and Bank CDS Spreads in Eurozone during the European Debt Crisis - The PSI Effect," MPRA Paper 68037, University Library of Munich, Germany.

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