We assess transmission channels of systemic risk and the effects of capital regulation in the European Banking Union. Two interconnected channels of risk are analysed by employing a data-driven, heterogeneous network model. First, the risk from shocks to corporate, sovereign and retail debt...

The current standardized approach for assessing credit risk under Basel III depends on ratings assigned by credit rating agencies (CRAs). However, this approach presents three problems. First, the definitions of ratings used by CRAs to assess the likelihood of default and recovery rates are not...