This paper provides a critical analysis of the subadditivity axiom, which is the key condition for coherent risk … measures. Contrary to the subadditivity assumption, bank mergers can create extra risk. We begin with an analysis how a merger … rejected, since a subadditive risk measure, by definition, cannot account for such increased risks. …

institutions bearing risks.We review the implications for regulatory capital requirement resulting from the risk model and risk … a result of the risk measure implementation framework and adopted risk aggregation methods in the SSA. In particular, we … show that risk aggregation turns out to be inconsistent with a coherent-type of risk measure, which would be a necessary …