Under the new Capital Accord, banks choose between two different types of risk management systems, the standard or the internal rating based approach. The paper considers how a bank's preference for a risk management system is affected by the presence of supervision by bank regulators. The model...

A defining difference of macro-style stress testing is the explicit consideration of profitability dynamics in the stress scenario. Traditional stress testing had focused almost exclusively on losses only, but a complete assessment of capital adequacy under stress must take into account not just...

Our paper investigates Indonesia's systemically important banks (SIBs) using theoretical approaches-CoVaR, marginal expected shortfall (MES), and SRISK-to compare with the Basel guidelines as benchmark. We use Indonesian banks' market and supervisory data over the 2008-2019 period. The research...

With transformative evolution involving crypto-assets, machine learning applications and data-driven finance models, complex regulatory and policy issues are emerging. Inadequate frameworks in FinTech markets create regulatory friction and regulatory fragmentation. These limitations continue to...

This paper investigates the impact of stress testing results on bank's equity and CDS performance using a large sample of twelve tests from the US CCAR and the European EBA regimes in the time period from 2010 to 2018. We find that passing banks experience positive abnormal equity returns and...

This paper investigates the impact of stress testing results on bank's equity and CDS performance using a large sample of twelve tests from the US CCAR and the European EBA regimes in the time period from 2010 to 2018. We find that passing banks experience positive abnormal equity returns and...

This paper proposes an operational approach to stress testing, allowing one to assess the banking sector's vulnerability in multiple plausible macro-financial scenarios. The approach helps identify macro-financial risk factors of particular relevance for the banking system and individual banks...

In 2019, the so-called “Capital Requirements” Directive 2013/36/EU (CRD IV) was amended by virtue of Directive (EU) 2019/878 (CRD V) in respect to several aspects, including the supervision of financial holding companies and mixed financial holding companies. The new rules apply from 1...

This paper is motivated by the implementation of the new banking supervision structure in the European Union (EU) and the possible conflict of interest between monetary policy and the supervision authority within the European Central Bank (ECB). The empirical analysis considers the relationship...

This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is...