Do the media capture banking system risk? Evidence from the EU-15 countries

The economic and financial crisis has highlighted the failure of banking authorities in capturing all the elements and information needed to ensure effective and sound regulation, supervision and risk management of the banking sector. Mass media are a potentially highly effective mechanism of external control on banking system. Our paper addresses a central question: do the media play a role in grabbing the banking risk-taking behaviour? Using the text-analysis technique, we develop two indices of risk coverage in relation to banking and economic issues for the EU-15 zone countries between 1998 and 2015. Then we ‘test on field’ both indices in relation to banking asset quality, and we find that for several countries, they are positively correlated with the financial stability indicator; on the other hand, we do not observe a widespread trend reversal which would reveal a ‘watchdog’ role of the media on banking riskiness.