The Impact of the 2007–2008 Financial Crisis on the Banking Systems in Advanced European Countries

Abstract The aim of this article is to explore the impact of the financial crisis in 2007–2008 on the banking sector in advanced economies of the European Union. The 2007–2008 financial crisis severely affected economies of the European Union, where the recession, the aftermath of the crisis, was more severe than in the US. Advanced economies were not often examined due to rare occurrences of financial crises in those countries, thus this research will contribute to the literature by providing detailed analysis of the crisis consequences on the economy and banking sector in advanced economies. Additionally, this research will provide an overview of the impact of the financial crisis on the banking sectors using the capital asset pricing model (CAPM) beta of the banking sector. The collapse of Lehman Brothers worsened the situation in the EU financial markets, where high volatility and a huge drop in the equity prices were observed. Furthermore, a high value of beta of banking sectors in 2007 and in 2008 i...