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EU Governments After the Crisis: Ready for Future Bailouts?

In: Digitalization in Finance and Accounting

Author

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  • Lukáš Marek

    (University of Economics, Prague, Faculty of Finance and Accounting)

Abstract

The aim of this chapter is twofold. First, we analyze a potential capital shortfall of 48 European banks in case they would be hit by a systemic crisis. Second, we calculate the financial impact on public debt if national governments stepped in with a bailout program. For the purpose of this exercise, this chapter uses data from the EBA 2018 EU-wide stress test and introduces higher leverage ratio of 4% and 7% for the adverse scenario in the 3-year horizon 2018–2020. In case of a systemic crisis, large banking sectors would experience significant capital shortfalls, including France, the UK, and Germany. Some other countries generally perceived as stable banking sectors such as the Netherlands and Denmark would also experience sizable capital gaps relative to the 7% leverage ratio threshold. The overall impact on governments’ indebtedness would be most pronounced in France, Italy, and Spain.

Suggested Citation

  • Lukáš Marek, 2021. "EU Governments After the Crisis: Ready for Future Bailouts?," Springer Proceedings in Business and Economics, in: David Procházka (ed.), Digitalization in Finance and Accounting, pages 157-167, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-55277-0_14
    DOI: 10.1007/978-3-030-55277-0_14
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