Report
Is a banking crisis more severe when banks’ return on equity is higher before the crisis?
We look at OECD countries and compare: The level of banks’ ROE (return on equity) before the 2008 crisis; The magnitude of the banking crisis (which can be measured by the rise in bank CDS, the fall in bank earnings, and the slump in banks’ share prices). We can imagine that a high bank ROE shows that banks: Have little capital, Have chosen a high risk level, which leads to a more severe banking crisis. We see, on the contrary, that the countries where banks’ ROE was the highest before the 2008 crisis did not have a more severe banking crisis than the other countries. T his explanation of banks’ excess profitability before the crisis is therefore not correct.
Provider
Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.