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 …

) risk estimates with portfolio risk. We use loan performance as a direct measure of portfolio risk as well as less direct … market-based measures. Our results document that loan performance is highly correlated with AIRB risk weights and that, in … contrast, Basel I risk weights are not reflective of loan performance. We find that capital requirements under the AIRB …

For financial regulators seeking to use regulatory requirements to manage risk in a banking system, there can be a … concern that such requirements crowd out efforts by banks to develop their own risk management systems. One way in which … regulators have attempted to solve this problem is to enable banks to use internal risk models to satisfy regulatory requirements …

regulation, recovery and resolution, and risk culture. …

Basel's new standardized approach (SA) for operational risk capital may allow for regulatory arbitrage through the use …

securitization. The Dodd-Frank Act and the EU Securitisation Regulation both impose a 5% mandatory retention requirement to motivate … encourage banks to shift risk. I then provide empirical evidence supporting this unintended consequence: in the US data, banks … rules caused banks to monitor and shift risk simultaneously. According to the model prediction, such a simultaneous increase …

We present a model where bank assets are a portfolio of risky debt claims and analyze stockholders' risk … increases, risk shifting by borrowers increases, even if their leverage is unchanged (zombie lending). (2) While the literature … increase prevails through a second channel: an increase in risk shifting. (3) Risk shifting decreases with the diversification …

We empirically assess the sensitivity of Basel risk weights to bank portfolio risk and the business cycle. With our … econometric model, we distinguish between cross-sectional risk sensitivity and longitudinal risk sensitivity (cyclicality) of the … regulatory standard. Employing a comprehensive data set covering 200 large banks from 28 countries, we find that actual risk …

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 …

credit and interest rate risk, the way it measures bank capital, and the way it creates countercyclical capital buffers …