Abstract:

In this study, financial stress assessment of the European Union (EU) Banking Sector had been achieved by fulfiling VAR analysis using Panel data set belong to EU countries called EU-19 group. To fulfil more consistent estimation, sample consist of EU-19 countries has divided two identical panel data group called "low-risk A" and "high-risk B" according to their S&P credit rating scores. Estimation results show that financial stability indicators defined in the study (such as Z-Score, Net Interest Margin and ROE) explained mainly by GDP. Besides strong evidence about that shock rises in credit deeping and international debt issues of studied EU countries negatively affect on financial stability indicators in the long term had been reached except for evidence about ROE in Group B countries.