Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The refereeing process of this paper has been coordinated by a team composed of Cornelia Holthausen, Kalin Nikolov and Bernd Schwaab (all ECB). Terms of use: Documents in EconStor mayThe paper is released in order to make the research of MaRs generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB or of the ESCB. AcknowledgementsWe thank Philipp Hartmann for inspiring and supporting this project throughout all stages. Philipp also invented the indicator's name and its abbreviation CISS (pronounced like "kiss"). We thank Tommy Kostka for excellent research assistance and for several good ideas which helped improving the CISS. Very helpful comments from Geert Bekaert, Wolfgang Lemke, Simone Manganelli and an anonymous referee are gratefully acknowledged. We finally thank participants at the Euro Area Business Cycle Network conference "Econometric Modelling of Macro-Financial Linkages" in Florence and the 5th CSDA International Conference on Computational and Financial Econometrics in London for fruitful discussions and comments. However, the views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank, the Eurosystem or the Magyar Nemzeti Bank. CISS indicatorPlease find weekly updates of the CISS data here. cross-correlations between the subindices. As a result, the CISS puts relatively more weight on situations in which stress prevails in several market segments at the same time, capturing the idea that financial stress is more systemic and thus more dangerous for the economy as a whole if financial instability spreads more widely across the whole financial system. Applied to euro area data, we determine within a threshold VAR model a systemic crisis-level of the CISS at which financial stress tends to depress real economic activity. Dániel HollóKeywords: Financial system, Financial stability, Systemic risk, Financial stress index, Macro-financial linkages JEL Classifications: G01, G10, G20, E441 Non-technical SummaryThe recent financial and economic crisis revealed considerable gaps in the theoretical and empirical frameworks for analysing, monitoring and controlling systemic risk in the financial system. Academics and financial authorities all around the globe accordingly have been stepping up their efforts to improve the suit of tools...

Information on all of the papers published in the ECB Working Paper Series can be found on the ECB's website, http://www.ecb. europa.eu/pub/scientific/wps/date/html/index.en.html Macroprudential Research NetworkThis paper presents research conducted within the Macroprudential Research Network (MaRs). The network is composed of economists from the European System of Central Banks (ESCB), i.e. the 27 national central banks of the European Union (EU) and the European Central Bank. The objective of MaRs is to develop core conceptual frameworks, models and/or tools supporting macroprudential supervision in the EU.The research is carried out in three work streams: 1) Macro-financial models linking financial stability and the performance of the economy; 2) Early warning systems and systemic risk indicators; 3) Assessing contagion risks.MaRs is chaired by Philipp Hartmann (ECB). Paolo Angelini (Banca d'Italia), Laurent Clerc (Banque de France), Carsten Detken (ECB) and Katerina Šmídková (Czech National Bank) are workstream coordinators. Xavier Freixas (Universitat Pompeu Fabra) acts as external consultant and Angela Maddaloni (ECB) as Secretary.The refereeing process of this paper has been coordinated by a team composed of Cornelia Holthausen, Kalin Nikolov and Bernd Schwaab (all ECB).The paper is released in order to make the research of MaRs generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB or of the ESCB. ideas which helped improving the CISS. Very helpful comments from Geert Bekaert, Wolfgang Lemke, Simone Manganelli and an anonymous referee are gratefully acknowledged. We finally thank participants at the Euro Area Business Cycle Network conference "Econometric Modelling of Macro-Financial Linkages" in Florence and the 5th CSDA International Conference on Computational and Financial Econometrics in London for fruitful discussions and comments. However, the views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank, the Eurosystem or the Magyar Nemzeti Bank. CISS indicatorPlease find weekly updates of the CISS data here.

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Apparent characteristics of the Hungarian banking market such as large profits and high margins suggest weak competitive pressures. Weak competition in turn, may reduce efficiency in a lack of pressures to converge to marginal cost and to stimulate managerial efforts to reduce X-inefficiency. Such conditions call for a gauging of efficiency of banks to better assess what is needed for a competitive and well-functioning banking system. Although the level of efficiency is only an indirect measure of competitive pressures, it may be superior to other ones available for international comparison. Concentration ratios are only a very imperfect measure, moreover, the Hungarian banking market structure with one larger and several somewhat smaller banks of similar sizes would suggest an even playing field. In fact, different market segments show very different degrees of concentration and several conditions for a competitive market are missing. Moreover, interest margins, particularly on mortgage loans are high in international comparison and the downward stickiness and lagged reaction of retail lending rates to money market rates also suggests weak competitive pressures. In a lack of readily available data to obtain mark-ups, which would be a better measure of competition than concentration measures or interest margins, this paper estimates cost efficiency scores that allow for grasping the size of competitive pressures indirectly. Cost efficiency is estimated in the EU 25 context given that cross-border competition can be important in some market segments and that cross-border lending is significant in Hungary. The paper uses the stochastic frontier analysis with a Fourier-flexible specification of the cost function and a time-varying decay model. A specific feature of the methodology is that bank lending is corrected for non-performing loans. This way, the categorising of banks that boost their loan portfolio by excessive risk-taking - i.e. produce large amounts of bad loans - as efficient can be partly avoided. The results show that in Hungary, bank efficiency is not particularly high in either European or regional comparison. Competition could be the major push for efficiency gains and the paper lists a series of measures that could be adopted to boost competitive pressures. This paper relates to the 2010 Economic Survey of Hungary. Les banques hongroises sont-elles efficientes ? Les caractéristiques apparentes du marché bancaire hongrois, comme l'importance des bénéfices et des marges financières, évoquent un manque de pressions concurrentielles. Cette faiblesse de la concurrence peut elle-même réduire l'efficience de ce marché, faute de pressions incitant à converger vers le coût marginal et à stimuler les efforts des dirigeants pour réduire l?inefficience-X. Cette situation invite à une évaluation de l'efficience des banques afin de mieux mesurer les conditions nécessaires à l?existence d'un système bancaire concurrentiel et fonctionnant bien. Bien que le niveau de l'efficience ne soit qu'un indicateur indirect de...