Did financial stability improve in the Euro area after Basel III was implemented and will it further improve under Basel IV?

Details

Supervisors

Bertand Candelon

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

Systemic banking crises have been affecting repeatedly our economies and societies on many levels. In response, the Basel Committee on Banking Supervision has been trying over the years to increase financial stability by making the banking system sounder and more resilient in order to resist shocks and avoid, or at least mitigate, the effects of systemic banking crises. This paper summarizes the journey from Basel I to Basel IV and studies the evolution of financial stability in the Euro area after the introduction of Basel III, and the expected evolution under Basel IV. In the empirical study, a dataset with the growth rate of daily share prices of ten major banks in the Eurozone is used for the period between the 1st January 2010 and the 31st December 2014. The latter allows the calculation of the moments of the distribution, the value-at-risk (VaR) and the violations of the VaR to observe the evolution of financial stability after Basel III was implemented. Results show that banks effectively became more stable since its introduction, however, no correlation is statistically proven between the two. Regarding Basel IV, no empirical analysis was made as the implementation date of most reforms is the 1st January 2022, however, the literature demonstrates that financial stability is expected to improve.

Citations

• APA

Meulewaeter, M. (2020). Did financial stability improve in the Euro area after Basel III was implemented and will it further improve under Basel IV? https://dial-mem.test.bib.ucl.ac.be/handle/2078.2/17921