We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another … asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk … constraints. Our results suggest the existence of incentive spillovers across different risk categories. We relate this behavior …

portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic … capital. Although it is known that joint market and credit risk of certain investments can be larger than the sum of risks … holdings or CDS portfolios – are also affected. There are realistic conditions under which credit risk (represented by ratings …

This paper deals with stress tests for credit risk and shows how exploiting the discretion when setting up and … probabilities are less exposed to model and estimation risk. In addition, the risk horizon over which the stress default … extensive robustness checks for model-based credit risk stress tests. …

adequacy related to credit risk. For the first time, it combines calibration of microprudential capital requirements and …/country-specific systematic factors, the model focuses on credit default concentration risk as a major source of large losses that may have … systemic impact. A test run using a sample of 12 systemically important German banks provides measures for systemic credit risk …

The internal ratings-based (IRB) approach maps bank risk profiles more adequately than the standardized approach. After … switching to IRB, banks' risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with … different supervisory strictness and risk levels. However, when examining 52 listed banks headquartered in 14 European countries …

securities with the highest yield and lowest collateral quality among ABS with the same regulatory risk weight. This ABS …

choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against … the risk of default outweighs the cost advantages of debt financing. In this setting, banks with lower monitoring costs … borrowing are shown to make higher-risk portfolios more attractive. Accounting for banks' interior capital choices can thus …

that time in general resilient to the default of large banks, i.e. did not exhibit substantial contagion risk. Even though …

probabilities, on reduced-form credit risk stress testing. This type of uncertainty is omnipresent in most macroeconomic stress … testing applications due to short time series for banks' portfolio risk parameters and highly collinear macroeconomic … distributions and implied capital shortfalls by conducting a full-edged top-down credit risk stress test for over 1,500 German banks …

A bank's decision on loan supply and capital structure determines its immediate bankruptcy risk as well as the future … vulnerability to bankruptcy risks. We study these intra- and intertemporal links and analyze the influence of risk-weighted capital … regulatory margin calls or large liquidity coverage ratios achieve bank stability for all risk levels, but for large risks a bank …