European banks systemic risk: A comparative study

Abstract

The global financial crisis, which started in the mid-2007, has led to the instability of the financial sector, highlighting the crucial role of systemic risk in its development. Because of the increase of the probabilities of individual firms‟ collapse, market attention focused on which institutions can be described as “too big” or “too connected” to fail since their collapse is likely to affect the wide economy. Therefore, the size distributions of banks attract the attention of the competent authorities and of the researchers since the effects of large banks‟ failure and the moral hazard, caused by large banks‟ bailouts, are the main reasons of economic instability. The weaknesses of the financial sector, which are underlined during the crisis period, demand the further investigation of systemic risk.