Does Primary Sovereignty Risk Matter for Bank Stability? Evidence from the Albanian Banking System

This paper analyses empirically the internal and external factors related to banking stability, especially if primary sovereignty risk affects banking stability. For this reason, we have followed a new method for calculating a risk index for the Albanian banking system, which is based on the balance sheet data reported by banks and reflects the banking situation in individual terms. The model is estimated based on a two-step General Method of Moments (GMM) approach with panel data for the period 2008 Q03 – 2015 Q03.