Returns and volatility spillover in the European banking industry during global financial crisis: Flight to perceived quality or contagion?

This paper compares the South African stock markets response to two periods of distinct instability, namely the East Asian and Russian crisis of 1997-98 and the global financial crisis of 2007-09. Considering share prices, the Johannesburg Securities Exchange (JSE) was more severely affected by the earlier crisis, when the domestic fundamentals were weaker. The low levels of foreign reserves were the main cause of concern. The paper further empirically investigates volatility spillover between the JSE and various developed and emerging stock markets during the two crisis periods, employing twelve separate bi-variate GARCH models. The main contributors to volatility spillover during the East Asian and Russian crisis were Mexico, Thailand, Brazil, and Germany predominantly emerging markets. During the second crisis period, Germany, US, Brazil, and UK played the dominant parts predominantly developed markets. The importance of Germany in both periods can be attributed to the countrys role as main export destination of South African goods in Europe.

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A Network Analysis of the Asia-Pacific and Other Developed Stock Markets: Pre and Post Global Financial Crisis

Applied Finance Letters ◽

10.24135/afl.v9i2.283 ◽

2020 ◽

Vol 9 ◽

pp. 112-131

Author(s):

Kousik Guhathakurtha ◽

Sharad Nath Bhattacharya ◽

Mousumi Bhattacharya

Keyword(s):

Hong Kong ◽

Financial Crisis ◽

Portfolio Management ◽

Stock Markets ◽

Global Financial Crisis ◽

Forecast Error ◽

Asia Pacific ◽

Volatility Spillover ◽

Risk Transfer ◽

Network Diagrams

This paper examines the volatility spillover and connectedness between Asia-Pacific, US, UK, and eurozone stock markets. A spillover index is built using forecast error variance decomposition in a vector autoregression framework and the spillover index is used to build network diagrams. It shows evidence of how the increase in risk transfer (volatility spillover) between the markets led to the global financial crisis and of the higher level of connectedness since. Network diagrams show the direction and strength of the connectedness. The network strength estimation enables us to understand the risk associated with connectedness across the markets in the event of a trigger and its influence in portfolio management decisions of international funds. The Chinese market appears to be the most insulated, while the South Korean, Hong Kong, and Singapore stock markets dominate in terms of risk transfer. The US, UK, EU, Singapore and Hong Kong are the top five volatility spillover recipient markets, both during pre and post global financial crisis periods. We find the market size to be irrelevant in the determination of the level of connectedness, whereas the role of geographical proximity cannot be ruled out. The findings are relevant to multinational investment strategies and in understanding the relative risk of investment in the Asia-Pacific region.

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Structural Breaks and Volatility Spillover in South Asian Economies

SEISENSE Journal of Management ◽

10.33215/sjom.v3i1.260 ◽

2020 ◽

Vol 3 (1) ◽

pp. 64-77

Author(s):

Hafiz Rauf Iqbal ◽

Syed Kashif Saeed ◽

Syed Zulfiqar Ali Shah

Keyword(s):

Financial Crisis ◽

South Asian ◽

Capital Markets ◽

Financial Crises ◽

Structural Breaks ◽

Global Financial Crisis ◽

Policy Implications ◽

Specific Reference ◽

Volatility Spillover ◽

The Impact

Purpose - This study examines the volatility spillovers in the presence of structural breaks with specific reference to South Asian Capital markets. The global financial crisis of 2007-2009 has compelled policymakers to realize that financial instability has the potential to threaten economic stability and growth; therefore, managing the financial crisis is inevitable. To manage the impact of financial crises, understanding the dynamics of volatility spillover across various markets is imperative. This study has investigated the possible emergence of structural breaks in risk patterns after global financial crises in south Asian markets. Methodology - Using the data from July 2002 to June 2016, employing the Exponential GARCH methodology. Findings - This study finds a significant volatility spillover after the financial crisis of 2007-09. Therefore, the existence of a structural break in the risk pattern of south Asian capital markets cannot be fully rejected. Policy Implications - This conclusion is of prime importance to policymakers in devising policy guidelines concerning financial crises.

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Banking in Australia and New Zealand—Geographic Proximity, Market Concentration, and Banking Integration

The Oxford Handbook of Banking ◽

10.1093/oxfordhb/9780198824633.013.38 ◽

2019 ◽

pp. 1189-1213

Author(s):

Fariborz Moshirian ◽

Eliza Wu

Keyword(s):

New Zealand ◽

Financial Crisis ◽

Great Recession ◽

Global Financial Crisis ◽

Banking Industry ◽

Banking System ◽

Geographic Proximity ◽

The Great Recession ◽

The Past ◽

Global Banks

This chapter focuses on the Australian and New Zealand (NZ) banking industry. Australian and New Zealand banks have undergone significant growth and challenges in the past decade. Australian banks weathered the Great Recession from 2008 and still recorded strong profits and minimal losses while other global banks failed internationally. To understand why this might be, we examine the composition of the closely integrated banking sectors in Australia and NZ, their respective performance, capital levels, and some defining regulatory reforms that have particularly shaped the Australian banking system since the 2008 Global Financial Crisis.

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“Fit and proper” regulations in the banking industry: What we have learnt in the post-crisis years

Journal of Governance and Regulation ◽

10.22495/jgrv9i3art6 ◽

2020 ◽

Vol 9 (3) ◽

pp. 84-95

Author(s):

Pablo de Andres ◽

Laura Arranz-Aperte ◽

Juan Antonio Rodriguez-Sanz

Keyword(s):

Financial Crisis ◽

Banking Industry ◽

The European Union ◽

Technical Standards ◽

Finance Industry ◽

Regulatory Changes ◽

Consumer Markets ◽

Regulatory Instruments ◽

Influential Paper ◽

European Banking

In a highly influential paper, Bradford (2015) coined the term “Brussels effect” to describe the way the EU regulatory power is externalized to third countries via consumer markets. In this paper, we analyze whether there is a Brussels effect in the finance industry as well. To do so, we study the evolution and regulatory changes put in place in Europe after the financial crisis to ensure that directors in the banking industry are adequately qualified and competent to meet the expertise and education requirements (the “fit and proper” criteria). We find that, as a result of the latest financial crisis, stricter board requirements were paired with stricter controls from the banking supervisory authorities in Europe. We describe the post-crisis regulatory framework as being characterized by 1) a strong commitment to regulation of risk management, 2) a multilayered control system and 3) a harmonized system with a strong presence of national regulatory authorities. We conclude that the European Union – through European Banking Authority (EBA) and the European Single Supervisory Mechanism (SSM) – has become a standard setter for the banking industry promoting international financial standards and “hardening” the soft law recommendations with directives and binding technical standards as regulatory instruments.

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