The Dodd-Frank Act (DFA) increased the liability of credit rating agencies amid the failure by rating agencies to discover fraud (Enron) and underestimation of the true riskiness (MBS,CDO). However, the effect of increased liability on the informational value of ratings is not clear-cut. On the...

We empirically investigated the impact of regulatory risk retention methods on credit ratings and pricing at issuance using a sample of European securitization tranches issued in the period 2011-2021. European regulation is based on the assumption that all risk retention methods homogenously...

A growing literature exploits credit score cutoff rules used by mortgage lenders as a natural experiment to estimate the moral hazard effect of securitization on underwriting. This research design is premised on the assumption that these cutoff rules are a response by lenders to securitization...

Failures of banks' governance and risk management functions have been identified as key causes of the 2007-2008 financial crisis. This article reviews the empirical literature that investigates the relationship between governance structures and risk management functions as well as their impact...

Operational risk management in banking has assumed such importance during the last decades. It has become increasingly important to measure, manage, and assess the impact of operational risk in the economics of banking. The paper aims to demonstrate how an effective operational risk management...

VaR remains important in market risk management as Basel keeps most of the backtesting based on 1% VaR. Comparative backtesting as practiced in the current literature suffers from a major double problem. On the one hand, the score functions, although strictly consistent, may assign very good or...

We present a statistical test for the long-term calibration in rating systems that can deal with overlapping time windows as required by the guidelines of the European Banking Authority (EBA), which apply to major financial institutions in the European System. In accordance with regulation,...

Credit risk measurement and management become more important in all financial institutions in the light of the current financial crisis and the global recession. This particularly applies to most of the complex structured financing forms whose risk cannot be quantified with com-mon rating...

Small and medium-sized enterprises (SMEs) are the backbone of most Asian economies. The main obstacle to the development of the SME sector is the lack of stable finance. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing, and the lack of a...