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...

The paper discusses the reform of capital regulation of banks in the wake of the financial crisis of 2007/2009. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, the paper calls for a thorough overhaul, moving away from risk calibration and...

Many studies have questioned the reliability of banks� calculations of risk-weighted assets (RWA) for prudential purposes. The significant divergences found at international level are taken as indicating excessive subjectivity in the current rules governing banks� risk measurement and...

This study focuses on the impact of capital constraints on the credit structure of commercial banks. Through theoretical modeling and optimization process, this study draws the conclusions that large-sized banks would grant more loans to large-sized enterprises and fewer loans to small-sized...

A recurring criticism of U.S. bank supervisors is that their standards vary procyclicly with banking and economic conditions. The 2010 reforms of supervisory standards for bank capital adequacy and liquidity (Basel III) directly address procyclicality in supervision and its effects on credit...

This study investigates the hypothesis that stricter capital adequacy requirements introduced under the 1988 Basel Accord caused Japanese banks to restrict loan growth. Using a panel of Japanese bank balance sheets for fiscal years 1982-1999, this study finds that the 1988 Basel Accord...

We examine the effect of book-to-market equity (BE/ME) on asset correlations in the asymptotic single risk factor (ASRF) framework under the Basel II Accord on regulatory capital requirement. Over a sample period from 1988 to 2007, we find that BE/ME is negatively related to asset correlations...

The paper discusses the reform of capital regulation of banks in the wake of the financial crisis of 2007/2009. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, the paper calls for a thorough overhaul, moving away from risk calibration and...

One “narrative” of the financial crisis of 2007-2009 is that poor corporate governance at financial institutions was a major cause of the crisis. An immediate implication of this narrative is that better corporate governance – a better alignment of the interests of senior management with...