An Empirical Study of International Spillover of Sovereign Risk to Bank Credit Risk

The severity and complexity of the recent financial crisis has motivated the need for understanding the relationships between sovereign ratings and bank credit ratings. This is the first study to examine the impact of the “ international ” spillover of sovereign risk to bank credit risk through both a ratings channel and an asset holdings channel. In the first case, the downgrade of sovereign ratings in GIIPS (Greece, Italy, Ireland, Portugal,...