The Global Financial Crisis and its Impact on Australian Bank Risk

23 Pages Posted: 4 Mar 2015

See all articles by Bernard Bollen

Bernard Bollen

University of New England (Australia) - New England Business School

Michael T. Skully

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

David W.L. Tripe

Massey University - School of Economics and Finance

Xiaoting Wei

Monash University

Date Written: March 2015

Abstract

This paper examines the global financial crisis (GFC) and its impact on Australian banking risk. An augmented market model is developed to identify changes in listed Australian bank systematic risk in relation to three key events: the GFC's start in August 2007, the market downturn in Australian and global share markets in January 2008, and the announcement of Australia's Deposit and Wholesale Funding Guarantee (DWFG) scheme on 12 October 2008. The study also examines changes in bank systemic risk during these event periods. The Australian market offers a unique opportunity to observe the impact of the introduction of the DWFG in that it lacked any explicit deposit insurance prior to the crisis. Initially, the crisis period had little impact on bank systematic risk while bank systemic risk increased considerably. The share market downturn caused a marked increase in both systematic and systemic risks for Australia's major internationally connected banks followed by a reduction in both systematic and systemic risks with the introduction of the guarantee scheme for all Australian banks.

Suggested Citation

Bollen, Bernard and Skully, Michael T. and Tripe, David W.L. and Wei, Xiaoting, The Global Financial Crisis and its Impact on Australian Bank Risk (March 2015). International Review of Finance, Vol. 15, Issue 1, pp. 89-111, 2015, Available at SSRN: https://ssrn.com/abstract=2573371 or http://dx.doi.org/10.1111/irfi.12041

Bernard Bollen (Contact Author)

University of New England (Australia) - New England Business School ( email )

Armidale, New South Wales
Australia

Michael T. Skully

Monash University - Department of Banking and Finance ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

David W.L. Tripe

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Xiaoting Wei

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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