Bank internal ratings of corporate clients are intended to quantify the expected likelihood of future borrower defaults. This paper develops a comprehensive framework for evaluating the quality of standard rating systems. We suggest a number of principles that ought to be met by 'good rating...

Banking regulation and supervision have a key role to play in realising the EU’s climate change objectives. In this article we analyse the EU-level initiatives currently underway to green the banking system, in particular with regard to the microprudential rulebook. We document how regulators...

We ask if bank supervisors’ efforts to combat climate change affect banks' lending and their borrowers’ transition to the carbon-neutral economy. Combining information from the French supervisory agency’s climate pilot exercise with borrowers' emission data, we first show that banks that...

In this paper, we study the impact of extreme events on the loan portfolios of the Greek banking system. These portfolios are grouped into three separate groups based on the size of the bank to which they belong, in particular, large, medium, and small size. A series of extreme scenarios was...

This paper studies the relationship between the riskiness of banks' assets and their average risk weight. Banks' initial risk weights explain about half of the variation in projected credit losses in the 2018 European Banking Authority stress test. In contrast to related papers, this paper also...

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 exposure in their trading book. This relationship is...