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In this paper, we examine the role of the Globally Systemic Important Banks, GSIB, located in Europe as a possible source of financial distress in eurozone. For this purpose we fit a MIDAS VAR to daily observation of individual bank CDS spread changes (a proxy of individual bank distress) and to the weekly observations of the CISS index constructed by ECB to proxy financial distress in the eurozone. Our findings show that, overall, GSIBs' distress shocks account for 8.5% of the EZ financial stress variation at 4-week horizon, by averaging across different regimes, and, during the financial turmoil period, their impact raises above 10%. Moreover, the shocks in MIDAS VAR model explain a much larger part of the FEVD than those obtained by a traditional VAR model.
