Individual, Systematic and Systemic Risks in the Danish Banking Sector

Johannes Kabderian Dreyer, Peter A. Schmid, Victoria Zugrav

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This article discusses the relationship between micro-prudential variables and bank risk. For this purpose, we collect panel data on 21 Danish banks accounting for 88% of total market share in Denmark from 2000 to 2015 and reflect upon the contribution of these different variables to bank individual, systematic and systemic risks. Our results suggest that the factors size, capitalization, funding structure, organizational complexity and degree of market-based activities are key risk determinants. Moreover, we find evidence that the Danish case is relatively peculiar with respect to the effects of bank size and of degree of market-based activities: Bank size contributes positively to systematic and systemic risks, but not to individual risk. Degree of market-based activities contributes to counteract individual risk, but on the other hand intensifies systematic and systemic risks. The Danish case could be taken as an example for other small economies with a highly concentrated banking sector.
Original languageEnglish
JournalFinance a Uver
Volume68
Issue number4
Pages (from-to)320-350
Number of pages31
ISSN0015-1920
Publication statusPublished - 2018

Keywords

  • individual risk
  • systematic risk
  • systemic risk
  • bank size
  • financial regulation

Cite this