Determinants of Systemically Important Banks : The Case of Europe

We investigate the drivers of systemic risk and contagion among European banks from 2007 to 2012. First, we derive a systemic risk measure from the concepts of MES and CoVaR analysing tail co-movements of daily bank stock returns. We then run panel regressions for our systemic risk measure using idiosyncratic bank characteristics and a set of country and policy control variables. Our results comprise highly significant drivers of systemic risk in the European banking sector with important implications for banking regulation