We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized banking system following Krause and Giansante (2012) where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as...

Today the global economy is going through a dynamic phase. The financial institutions of the world are exposed to such dynamic environment and the Indian financial sector in not having any exemption to it. The India financial sector is exposed to uncertainty like the overall global financial...

We critically review the state of the art in macro stress testing, assessing its strengths and weaknesses. We argue that, given current technology, macro stress tests are ill-suited as early warning devices, ie as tools for identifying vulnerabilities during seemingly tranquil times and for...

We propose to pool alternative systemic risk rankings for financial institutions using the method of principal components. The resulting overall ranking is less affected by estimation uncertainty and model risk. We apply our methodology to disentangle the common signal and the idiosyncratic...

Asset encumbrance is a central concept in the context of banks’ liquidity crises, as it is associated with their capacity to obtain secured funding. This occasional paper summarises the work carried out by the task force on asset encumbrance, bringing together analyses by the ECB and those...

This paper bridges the gap in trading risk management literatures, and particularly from the perspective of emerging and illiquid markets. We find that under certain trading strategies, such as short-selling of stocks, the sensitivity of L-VaR statistics are rather critical to the selected...

This paper offers a joint estimation approach for forecasting probabilities of default and loss rates given default in the presence of selection. The approach accommodates fixed and random risk factors. An empirical analysis identifies bond ratings, borrower characteristics and macroeconomic...

The Global Financial Crisis exposed financial institutions to severe unexpected losses in relation to mortgage securitizations and derivatives. This paper analyzes a unique and extensive ratings and impairment events database for securitizations. The paper finds that risk models such as ratings...

This paper empirically investigates the causes of bank failures in Japan and Indonesia. Using logistic regression analysis of financial ratios, we explore the usefulness of domestic bank failure prediction models with a cross-country model that allows for cross-correlation of the error terms.Our...