This paper analyses the evolution of the safety and soundness of the European banking sector during the various stages of the Basel process of capital regulation. In the first part we document the evolution of various measures of systemic risk as the Basel process unfolds. Most strikingly, we...

Based on the macro-financial risk framework of Gray et al. (2006) that links the balance sheets of the financial sector and public sector together through government guarantees, we propose an indicator, sovereign distance-to-default (SDD), for implementing the countercyclical capital buffer...

How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks' lending, their corresponding risk-taking, the ensuing effect on their...

How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks’ lending, their corresponding risk-taking, the ensuing effect on their...

How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks' lending, their corresponding risk-taking, the ensuing effect on their...

We propose an improved methodology for modelling potential scenario paths of banks' riskweighted assets, which drive the denominator of capital adequacy ratios. Our approach centres on modelling the internal risk structure of bank portfolios and thus aims to provide more accurate estimations...

This paper studies, theoretically and empirically, the unintended consequences of mandatory retention rules in securitization. The Dodd-Frank Act and the EU Securitisation Regulation both impose a 5% mandatory retention requirement to motivate screening and monitoring. I first propose a novel...

IFRS 9 substantially affects the financial sector by changing the impairment methodology for credit losses. This paper analyzes the implications of the change from IAS 39 to IFRS 9 in the context of bank resilience. We shed light on two effects. First, the "cliff-effect", which refers to sudden...

The internal ratings-based (IRB) approach maps bank risk profiles more adequately than the standardized approach. After switching to IRB, banks' risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with different supervisory strictness and risk levels....

The latest financial crisis has exposed substantial weaknesses in the bank risk models used by national regulators as well as the Basel Accords. The study is aimed at presenting the evolution and critique of risk measures and risk models in banking, with a special focus on the dynamically...