Title: The evaluation of banking stability in the European Union countries

Authors: Kristína Kočišová; Daniel Stavárek

Addresses: Faculty of Economics, Department of Banking and Investments, Technical University of Košice, Nemcovej 32, Košice 04001, Slovakia ' School of Business Administration in Karvina, Department of Finance and Accounting, Silesian University in Opava, Univerzitní náměstí 1934/3, Karviná 73340, Czech Republic

Abstract: Successful development of the economy is based on the effective and stable performance of credit institutions. This paper discusses some of the existing efforts to evaluate stability in the financial or banking system and brings attempts to construct the banking stability index (BSI), taking into account indicators of the financial strength of banks and major risks affecting banks in the banking system. The BSI is then used for evaluation of banking stability in the European Union (EU) countries. Results showed that in 2014 countries with the most stable banking sectors were Luxembourg and Estonia. On the opposite end of the scale were banking sectors in Spain, Portugal and Greece. The outcome of the study showed a decline of the average banking stability in EU countries during the period of 2005-2008 and its improvement since 2009. The improvement in last year's was positively affected mainly by the development of the capital adequacy.

Keywords: FSI; financial soundness indicators; BSI; banking stability index; EU countries.

DOI: 10.1504/IJMEF.2018.090566

International Journal of Monetary Economics and Finance, 2018 Vol.11 No.1, pp.36 - 55

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 13 Mar 2018 *

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