ISSN: 2225-8329
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This paper proposes a multi – perspective approach for testing the banking sustainability in Europe, with a focus on the relationships between economic cycles, stock exchange market evolution and banking risks. More precisely, we examine the key drivers of banking profitability, non-performing loans rate, system solvency and economic growth based on banking and macroeconomic information. Our empirical analysis reveals the limitations of the existing risk models when it comes to efficiently identifying the main factors that generate massive losses for the banking industry. We report robust estimates indicating that capital level for covering banking risks should be increased. Furthermore, we bring strong empirical evidence revealing that capital market evolution exerts an important impact on banking stability. Our findings have serious policy influences and our proposals are made up of adjustments on the current European regulatory laws. In our opinion, national and European authorities should consider similar multi – approaches for banking risk evaluation in order to make relevant decisions that will eventually prevent further financial crises.
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To cite this article: Pop, I.-D. (2019). Systemic Sustainability of European Banking Activity: A Multi- Perspective Approach, International Journal of Academic Research in Accounting, Finance and Management Sciences 9 (3): 54-63
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