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The Vulnerability of Europe's Small and Medium-Sized Banks. Bruegel Working Paper 2015/07, 16 July 2015

Mody, Ashoka and Wolff, Guntram B. (2015) The Vulnerability of Europe's Small and Medium-Sized Banks. Bruegel Working Paper 2015/07, 16 July 2015. [Working Paper]

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    Abstract

    We study the vulnerability of 130 banks directly supervised by the European Central Bank’s Single Supervisory Mechanism. Illustrative stress tests using banks’ balance sheet data reveal that significant stress prevails in the euro area’s smaller and medium-sized banks, many of them located in southern Europe. The banks we identify as stressed also have performed substantially worse on the stock market. The vulnerable banks are typically hobbled by non-performing loans to European businesses. Strengthening the banking system, therefore, is important to achieve sustainable recovery because it will revitalise credit to the healthier segments of the economy. But instead of emphasising bank recapitalisation, as in past years, we believe the task is to shrink the banking sector to a healthier core.

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    Item Type: Working Paper
    Uncontrolled Keywords: Single Supervisory Mechanism.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Bruegel (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 21 Jul 2015 13:06
    Number of Pages: 32
    Last Modified: 21 Jul 2015 13:06
    URI: http://aei.pitt.edu/id/eprint/65903

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