This paper outlines a framework based on microdata and a structural model to gauge credit risk in banks' exposures to non-financial firms. Sectoral risk factors are accounted for using a multi-factor model. We use expected and unexpected losses as indicators of credit risk stemming from the...

Although risk culture is a key element in the risk management process, identifying the riskculture of a firm can be challenging due to the abstract concept of culture. We introduce textmining and unsupervised machine learning algorithms to define the risk culture for U.S. bankholding companies...

Financial regulation has led banks to increase their equity ratios. Yet, several studies find that this has not led to a decrease in bank equity risk. We show theoretically, that keeping less capital in excess of the minimum capital requirement can outweigh the risk-reducing effect on equity of...

It has been shown in the empirical literature that operational losses of financial firms can cause severe reputational losses, which, however, are typically not taken into account when modeling and assessing operational risk. The aim of this paper is to fill this gap by assessing the...

We examine the risk-taking behavior of privatized banks prior to and after privatization and find that privatized banks experience a significant decrease in risk after privatization but they continue to exhibit higher risk taking than their rivals. This finding is consistent with the assertion...

Nowadays financial institutions due to regulation and internal motivations care more intensively on their risks. Besides previously dominating market and credit risk new trend is to handle operational risk systematically. Operational risk is the risk of loss resulting from inadequate or failed...