Does the Euro crisis change the cross-correlation pattern between bank shares and national indexes?

The objective of this paper is to analyze if the Euro crisis, which started in 2009, changes the cross-correlation pattern of bank shares with the national stock indexes in both in Eurozone and non-Eurozone countries. We study all banks listed in the main stock indexes of European Union countries, applying the detrended cross-correlation coefficient. An increase in the correlation indicates that the banking sector now has a greater influence in the national index, while a decrease in the correlation means the opposite. Our results show that 19 of the 39 banks analyzed in the Eurozone increased their correlation with national indexes, whilst in the non-Eurozone countries this happened with 14 of the 24 studied banks. While some authors argue that the crisis may have been aggravated by the weight of banks in the economy, Eurozone policy makers should pay attention to this feature.