This paper investigates the factors influencing banks' decision to engage in advanced risk management, from both a theoretical and an empirical perspective. In recent decades, credit risk management in banks has become highly sophisticated and banks have become more active and advanced in the...

Better “financial soundness†of banks could help mitigate the volatility of financial cycles by reducing banks’ risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit....