This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of financial activities and their ability to withstand a banking sector crash. We first generate market-based measures of banks’ systemic risk exposures using extreme value...

The purpose of this study is to present a sustainable (or green) loan loss provisioning system that align bank loan loss provisioning with the sustainable development goals. The findings of the study are that the proposed sustainable (or green) loan loss provisioning system will align bank loan...

The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the implications for financial stability in the region. Using a dynamic panel model, we assess the determinants of the evolution...

We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic fragility indicators for euro area banks and sovereigns, based on CDS...

The parameter loss given default (LGD) of loans plays a crucial role for risk-based decision making of banks including risk-adjusted pricing. Depending on the quality of the estimation of LGDs, banks can gain significant competitive advantage. For bank loans, the estimation is usually based on...

In this paper, we develop a new capital adequacy buffer model (CABM) which is sensitive to dynamic economic circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel combination of the Merton structural model which measures...

In 2001, government guarantees for savings banks in Germany were removed following a law suit. We use this natural experiment to examine the effect of government guarantees on bank risk taking, using a large data set of matched bank/borrower information. The results suggest that banks whose...

Using a novel panel data set we study the macroeconomic determinants of nonperforming loans (NPLs) across 75 countries during the past decade. According to our dynamic panel estimates, the following variables are found to significantly affect NPL ratios: real GDP growth, share prices, the...

Following the financial crisis, the share of non-performing loans has significantly increased, while the regulatory guidelines on the Internal-Ratings Based (IRB) approach for capital adequacy calculation related to defaulted exposures remains too general. As a result, the high-risk nature of...

Leasing provides a fundamental source of firm funding, especially for small and medium-sized enterprises. A crucial difference from loans and bonds is that the lessor retains ownership rights of the leased asset during the lease term. This facilitates the asset utilization and work-out process...