The treatment of demand loans and deposits is crucial in measuring a bank's actual exposure to the interest rate risk in the banking book. The repricing gap model, the most popular approach to measure this kind of risk, is based on a maturity/repricing schedule, according to which...

The recent banking crisis has revealed the existence of strong resiliency factors in the retail banking business model. On average, retail banks suffered less than other financial institutions from unexpected market changes. This paper proposes a new methodology to measure retail banks’...

Der vorliegende Beitrag beschäftigt sich mit der Aufarbeitung der Hintergründe der Subprime-Krise sowie der nachfolgenden internationalen Banken- und Finanzkrisen. Auf dieser Basis werden Vorschläge diskutiert, wie die erkannten Schwachstellen im Finanzsystem repariert bzw. behoben werden...

We develop an operational model of information contagion and show how it may be integrated into a mainstream, top-down, stress-testing framework to quantify systemic risk. The key transmission mechanism is a two-way interaction between the beliefs of secondary market investors and the...

We show that a pattern of earnings management in bank financial statements has little bearing on downside risk during quiet periods, but seems to have a big impact during a financial crisis. More aggressive earnings managers prior to 2007 exhibit substantially higher risk once the financial...

This paper investigates (1) how the composition of executive compensation is related to a bank's incentive to take excessive risk, (2) whether executive compensation in larger banks, especially the too-big-to-fail (TBTF) banks, induces more severe moral hazard behavior, and (3) how the relation...

We study solvency contagion risk in the UK banking system from 2008 to 2015. We develop a model that only accounts for losses transmitted after banks default, but also for losses due to the fact that creditors revalue their exposures when probabilities of default of their counterparties change....

The financial crisis exposed enormous failures of risk management by financial institutions and of the authorities' regulation and supervision of these institutions. Reforms introduced as part of Basel III have tackled some of the most important fault‐lines. As the focus now shifts toward the...

The paper analyzes the role of financial regulation in facilitating the development of organizational norms to enhance risk culture in banking institutions. Specifically, it examines the regulatory responses and industry-led initiatives taken since the financial crisis of 2007-08 to address...

We examine the effectiveness of bank regulation in the light of creditor diversity. Our theory suggests a bank can increase its value by matching the riskiness of its securities and the risk tolerance of its diverse creditors. Even a well-capitalized bank might not eliminate financial fragility...