The solution adopted in Basel II to deal with procyclicality of capital requirements (i.e. through the cycle ratings and long-run average estimates of default probabilities) implies a reduction in the risk-sensitivity that contradicts the original spirit of the new framework.In order to preserve...

The European Banking Authority (EBA) stress tests, which aim to quantify banks' capital shortfall in a potential future crisis (adverse economic scenario), further stimulated an academic debate over systemic risk measures and their predictive/informative content. Focusing on marked based...

The introduction of Basel II has raised concerns about the potential impact of risk-sensitive capital requirements on the business cycle.  Several approaches have been proposed to assess the procyclicality issue.  In this paper, we adopt a general equilibrium model and conduct comprehensive...