same time, it has complicated banking regulations and its consequent risk management mechanisms. The GFC and consequent … Basel III have accentuated the importance of operational risk management manifold by adding new perspectives to the concept … which was not identified properly under sophisticated and graded risk assessment processes in the years before the financial …

integration of new datasets and model validation efforts as well as the expanded use of stress-testing methodologies in risk and …

The incremental risk charge (IRC) is a new regulatory requirement from the Basel Committee in response to the recent … generated. The second Monte Carlo simulation is the random draws based on the constant level of risk assumption. It convolutes …

regulatory equity and the increasing reliance on banks’ internal risk models for the determination of risk weights. The first … trend has been reversed with the regulatory reforms following the financial crisis. Internal risk models will still play a … central role. The rest of the paper focuses on the problems with the use of internal risk models for regulatory purposes. The …

We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another … asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk … constraints. Our results suggest the existence of incentive spillovers across different risk categories. We relate this behavior …

to force banks to develop adequate internal risk management procedures while taking a largely agnostic approach as to … downplay risk, while large financial institutions gain a significant advantage and the distribution of responsibility between …-grained guidance on how banks should evaluate climate risk. Although we broadly think this approach is the more effective route to …

Choosing a proper external risk measure is of great regulatory importance, as exemplified in the Basel II and Basel III … Accord which use Value-at-Risk (VaR) with scenario analysis as the risk measures for setting capital requirements. We argue a … good external risk measure should be robust with respect to model misspecification and small changes in the data. A new …

Purpose: SME sector credit risk has received attention in research from several dimensions of the financial system. SME … current research on the area, we approach SME risk from perspective of FIs own risk assessments and compare it to how SME risk … rating and measurement compares to other counterparties. Design/methodology/approach: We use published risk rating data from …

). Our results proved a heavy-tailed pattern of operational risk data consistent with the results documented by other … banks from emerging markets such as Central Europe are exposed to these operational risk events and that successful … estimates of the likely distribution of these risk events can be derived from more mature markets. -- operational risk …

Regulations leading up to the financial crisis of 2007-2009 provided incentives for banks shift their risk profiles … toward less regulated areas. We focus on the case of operational risk which went from being a relatively benign and largely … unregulated risk type to a major risk that now accounts for about 25% of large banks' risk profile. We show that capital …