Do Bank Assets As A Multiple Of GDP Correlate To Bank Risk?

Banks assets as a multiple of GDP has been considered a possible indicator of systemic risk. The following chart compiled by the Institute of International Finance showing these figures for select countries in Europe, however, demonstrates that the multiple in itself is not always an indicator of risk or a bubble. Luxembourg has a very solid economy, and its bank assets show by far the highest multiple to its GDP in the euro area. But perhaps Luxembourg is an exception because of its small economy, since most other countries with multiples higher than the EU average show some sign of risk in their banking system.

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