Interdependences among European Banks Via the Market Model

Based on the works elaborated by De Nicolo and Kwast (2002), Schüler (2003), Schüler and Schröder (2003), Gropp and Vesala (2003) and Aglietta et al (2000), this article aims at to study the systemic risk within the European Union. Indeed, the correlation between market model residues have been applied for the purpose of highlighting advancing the interdependence among the European banks domestically as well as at across border levels. The method applied is to capture residue from several regressions and calculate the average correlations. Actually, as for as our study sample it has been demonstrated that both domestic as well as cross border interdependences do exist among concerned institutions (i.e. banks). Assuming the propagation of a negative externality, we concluded a possible systemic risk within the European banking 1 University of Economics and Management Sfax-Tunisia, e-mail: [email protected] Article Info: Presented at Second International Symposium in Computational Economics and Finance in Tunis, March 15-17, 2012 Published online : August 31, 2012 118 Interdependences among European banks via the market model industry appears prevalent and plausible in conformity with criteria set by De Nicolo and Kwast (2002), Schüler (2003), Schüler and Schröder (2003). JEL Classification: G12, G14