Systemic Risk in Europe: A bank-level evaluation of the implications of financial interconnections, public bailouts, and corporate governance mechanisms in the aftermath of the financial crisis.

The global crisis produced negative externalities both for the financial services industry and for the real economy by contributing to enhancing the debate on the systemic risk. In fact, in response to the banking crises, regulatory agencies encouraged more efforts to monitor, analyze and understand systemically important financial institutions to better identify the determinants of the bank’s contribution to the overall systemic risk. Furthermore, public authorities launched banks’ rescue programs to contain the systemic risk, ensure the solvency of financial institutions, and restore the confidence in financial markets. For instance, the US governments launched TARP in the October 2008. A few months later, the British government announced a public intervention of 740 billion euros to ensure bank’s assets. Finally, de Larosière Group (2009) and Basel Committee on Banking Supervision (2010) revealed deficiencies in the bank’s corporate governance by identifying a strong link with risk-taking and systemic risk. The aim of this dissertation is to investigate the potential sources of systemic risk by analyzing respectively: i) financial interdependencies among banks: quantifying network effects and the stress at which banks are exposed during banking crises by bridging the banking literature with the social network literature; ii) public bailouts: understanding whether safety-nets may create (or mitigate) systemic effects intended as fuelling (or smoothing) bank moral hazards of rescued banks and the possible introduction of competitive distortions in the banking system; iii) corporate governance: investigating the link between bank’s board diversity and bank’s risk.