Existing stress tests do not capture feedback loops between individual institutions and the financial system. To identify feedback loops, the European Systemic Risk Board has developed macroprudential surveys that ask banks and insurers how they would behave in a macroeconomic stress scenario....

The purpose of this research is to examine the influence of bank life cycle or bank maturity on income diversification (ID) and stability. In addition, this research investigates the ID relationship with bank stability. Drawing on the dynamic resource-based view and modern portfolio theory, this...

This paper explores the development of enterprise risk management as a function of the development of risk-based capital across the world over the last two decades. The paper identifies a clear correspondence between the emergence of RBC and ERM. The development of RBC worldwide was triggered by...

Default risk permeates the behavior of corporate bond returns and spreads, credit default swap spreads, estimation of default probabilities, and loss in default. Pertinent to this review are salient empirical findings and implications of default process estimation over 1974 to 2021. Both...

We propose a new form of hybrid capital for banks, Equity Recourse Notes (ERNs), which (1) ameliorate booms and busts by creating counter-cyclical incentives for banks to raise capital, and so encourage bank lending in bad times; (2) help solve the too-big-to-fail problem; and (3) reduce the...

In this paper, we examine the role of information sharing and borrower legal rights in affecting the procyclical effect of bank loan loss provisions. Based on a sample of Asian banks, our empirical results highlight that higher non-discretionary provisions reduce loan growth and hence,...

The purpose of this article is to examine the current situation of non-performing loans (NPLs) in the EU from a diachronic perspective, with a special focus on the regulatory and factual events relating to the Covid-19 pandemic. Although we agree with Cicero that "Historia vero testis temporum,...

The simultaneous unwinding of leveraged positions can trigger financial market turbulence. Although balance-sheet measures of leverage are available, it is useful to construct a measure of leverage that incorporates both on- and off-balance-sheet activities. This paper provides measures of...

Risk culture is essential for the success of enterprise risk management (ERM). Enterprise riskmanagement is different from silo risk management where risks were mainly managed by onedepartment. Enterprise risk management means that the risk management is integrated fromBoard to the last employee...

Banks' reluctance to repair their balance sheets, combined with deposit insurance and regulatory forbearance in recognizing greater risks and losses, can lead to solvency problems that look like liquidity (bank-run) crises. Regulatory forbearance incentivizes banks to both retain risky loans and...