Journal of Financial Services Research

, Volume 43, Issue 1, pp 37–68 | Cite as

The Volatility of European Banking Systems: A Two-Decade Study

  • Francesco Vallascas
  • Kevin Keasey


This paper examines the trends and composition of volatility across European banking systems from January 1988 to December 2010. While there is no evidence of a long-term trend in the average level of banking system volatility, there is a change in its composition resulting from the growing importance of International and European nonfinancial components, especially in the largest banking systems. We argue that the changing composition of banking system volatility is the effect of a long-term integration process (with a growing importance of cross-border activities) that has not been influenced by the introduction of the Euro. Our results highlight the increasing vulnerability of the European banking systems to International and European shocks and an increasing likelihood of cross-border banking crises, and the need for regulatory reforms that focus on effective cross-border crisis management and resolution so as to safeguard the systemic stability of European banking in the near future.


Banking system volatility European banking Financial integration 


G21 G28 


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Leeds University Business SchoolThe University of LeedsLeedsUK

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