This paper proposes a methodology to analyze the implications of the Advanced Measurement Approach (AMA) for the assessment of operational risk put forward by the Basel II Accord. The methodology relies on an integrated procedure for the construction of the distribution of aggregate losses,...

We model 1927-1997 U.S. business failure rates using a time series approach based on unobserved components. Clear evidence is found of cyclical behavior in default rates. The cycle has a period of around 10 years. We also detect longer term movements in default probabilities and default...

Since Basel II was introduced in 2008, two approaches to calculating bank capital requirements have co-existed: lenders' internal models, and a less risk-sensitive standardised approach. Using a unique dataset covering 7 million UK mortgages for 2005–15, and novel identification, we provide...

In this paper, the standardized approach will be analyzed and studied. At first, an analysis will be provided to better understand why CCR became so important, what are its characteristics, etc…. Then a discussion around the CVA definition from the regulator's perspective will be presented....

In the wake of the 2008 financial crisis, bank regulators are paying more attention to derivatives. In a move that can be seen as a step away from fair-value accounting, bank regulators (Basel III) have proposed to calculate bank leverage ratios using notional values, rather than fair values, of...

Prior to 2018, accounting rules required banks that recognize financial liabilities at fair value to record unrealized gains and losses on the liabilities attributable to changes in the banks' own credit risk, referred to as the debt valuation adjustment (DVA), in earnings each period. Using a...

I provide evidence that loan loss accounting affects procyclical lending through its impact on regulatory actions. Regulators are more likely to place banks with inadequate loan loss allowances under enforcement actions that restrict lending, leading these banks to lend less during downturns....

This paper proposes a methodology to analyze the implications of the Advanced Measurement Approach (AMA) for the assessment of operational risk put forward by the Basel II Accord. The methodology relies on an integrated procedure for the construction of the distribution of aggregate losses,...

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 capital...