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 …

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 …

The subprime crisis revealed that the adoption of suitable systems for the management of credit risk is of utmost … assessing the capital adequacy. This paper investigates whether decisions on total risk-based capital ratios are channeled … thus advance regulation. -- Risk management ; regulation ; capital requirement ; credit portfolio model ; propensity score …

This paper provides initial evidence on counterparty risk-mitigation activities of financial institutions on the basis … successive contracts and purchase protection written on them, even avoiding wrong-way risk mitigation. Higher stock return and … protection purchase on the counterparty would diminish the required capital, this type of risk mitigation could follow regulatory …

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 …

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 …

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

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. …