Banking sector fragility linkages in the euro area: Evidence for crisis years 2007-2010

•We analyze Eurozone banking sector fragility linkages in the period 2007-2010.•We use rolling Granger causality tests to examine their time-varying behavior.•We observe a significant increase in fragility linkages during the recent crisis.•The epicenter of spillover risk shifted from periphery towards the core countries.

We investigate fragility linkages among national banking sectors in the euro area during the crisis years 2007-2010. We find that their number increased sharply with the outbreak of the subprime crisis in the US in the first half of 2007 and then remained at a relatively constant and high level until the Greek bailout and the creation of the Eurozone-wide bailout funds in mid-2010. The epicenter of spillover risk shifted from banking sectors in the euro area periphery towards banking sectors in the core countries during the period.