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Banking solvency determinants in the EU: a model based on stress tests

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  • Julio Abad-González
  • Cristina Gutiérrez-López
  • Ana Salvador

Abstract

Using a multilevel regression model, this article aims to find determinants of banking solvency in the European Union. The endogenous variable is defined as the capital ratio determined by stress tests. Both internal (financial ratios and sovereign debt exposures) and external (macroeconomic indicators) variables are proposed as covariates. The results reveal that capitalization, earnings, assets structure and exposure to PIIGS (Portugal, Italy, Ireland, Greece and Spain) sovereign debt are significant among the former, and economic growth, interest and exchange rates, and real estate prices among the latter.

Suggested Citation

  • Julio Abad-González & Cristina Gutiérrez-López & Ana Salvador, 2018. "Banking solvency determinants in the EU: a model based on stress tests," Applied Economics Letters, Taylor & Francis Journals, vol. 25(18), pages 1296-1300, October.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:18:p:1296-1300
    DOI: 10.1080/13504851.2017.1418071
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    Cited by:

    1. Cristina Gutiérrez-López & Julio Abad-González, 2020. "Sustainability in the Banking Sector: A Predictive Model for the European Banking Union in the Aftermath of the Financial Crisis," Sustainability, MDPI, vol. 12(6), pages 1-25, March.
    2. Munawar Shabbir & Shazia Hassan & Ayesha Zareef, 2018. "Impact of Market Risk on Credit Risk of Subsequent Period in Manufacturing Sector of Pakistan," Global Social Sciences Review, Humanity Only, vol. 3(3), pages 281-299, September.

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