Int. J. of Monetary Economics and Finance   »   2012 Vol.5, No.2



Title: Convergence and clustering of Tier 1 capital in the European banking sector: a non-linear factor approach


Authors: Nicholas Apergis; Alexandros Gabrielsen; James E. Payne; Paolo Zagaglia


Department of Banking and Financial Management, University of Piraeus, Karaoli and Dimitriou 80, Piraeus, ATTIKI 18534, Greece
Cass Business School, City University, London EC1Y 8TZ, UK
Department of Finance, College of Business, University of South Florida, USA
Department of Economics, Università di Bologna, Strada Maggiore 45 - 40126 Bologna, Italy


Abstract: This short communication examines the convergence of the Tier 1 capital ratio in the banking sector across the EMU. The study applies the Phillips-Sul convergence and clustering algorithm for 251 European banks over annual periods from 1990 to 2010. The null hypothesis of full convergence is rejected; however, the convergence tests reveal heterogeneity in the Tier 1 capital ratio in the European banking sector, with five distinct clusters.


Keywords: Tier 1 capital ratio; Phillips-Sul club convergence method; Europe; banking sector; EMU; Economic and Monetary Union; European Union; clustering algorithms; European banks; equity capital; risk-weighted assets.


DOI: 10.1504/IJMEF.2012.048738


Int. J. of Monetary Economics and Finance, 2012 Vol.5, No.2, pp.210 - 221


Available online: 28 Aug 2012



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