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The Role of Shadow Banking in Systemic Risk in the European Financial System

Bellavite Pellegrini, C., Cincinelli, P., Meoli, M. & Urga, G. ORCID: 0000-0002-6742-7370 (2022). The Role of Shadow Banking in Systemic Risk in the European Financial System. Journal of Banking and Finance, 138, 106422.


We study how the characteristics of different financial institutions relate to systemic risk using the CoVaR measure of Adrian and Brunnermeier (2016). We contrast traditional banks with shadow entities, such as Money Market Funds and Finance Services, using a sample of 476 European financial institutions between 2006 and 2015. We find that systemic risk increases significantly in the size of large financial institutions, particularly Money Market Funds, while it is insensitive to the size of Finance Services. We also find that Finance Services are particularly sensitive to proxies for market risk. For traditional banks, their reliance on short term wholesale funding is a key determinant of their contribution to systemic risk.

Publication Type: Article
Additional Information: © 2022. This article has been accepted for publication in Journal of Banking and Finance by Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Publisher Keywords: Systemic Risk, Shadow Banking, Financial Crisis, CoVaR, Panel Data
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
[img] Text - Accepted Version
This document is not freely accessible until 20 July 2023 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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