Credit risk measurement remains a critical field of top priority in banking finance, directly implicated in the recent global financial crisis. This paper examines the dynamic linkages between credit risk migration due to rating shifts and prevailing macroeconomic conditions, reflected in...

This paper introduces Basel II, the construction of risk weight functions and their limits in two sections:In the first, basic fundamentals are presented to better understand these prerequisites: the likelihood of losses, expected and unexpected loss, Value at Risk, and regulatory capital. Then...

The Basle Committee is seeking to amend the 1988 Accord by introducing a new capital adequacy framework for credit institutions. The proposals, put forward in a consultative paper issued in June 1999 (A New Adequacy Framework), have been submitted for comments to the international banking...

The recent banking crisis has revealed the existence of strong resiliency factors in the retail banking business model. On average, retail banks suffered less than other financial institutions from unexpected market changes. This paper proposes a new methodology to measure retail banks’...

This paper discusses the necessity and effectiveness of Basel III in ensuring prudent risk management in the banking system across the world. The aftermath of the 2007/2008 global financial crises provoked the introduction of Basel III in 2009. It was published to improve upon Basel II which...

Traditional capital structure theory predicts that reducing banks' leverage reduces the risk and cost of equity but does not change the weighted average cost of capital, and thus the rates for borrowers. We confirm that the equity of better-capitalized banks has lower beta and idiosyncratic...

In mid-September 2008, following the bankruptcy of Lehman Brothers, international interbank markets froze and interbank lending beyond very short maturities virtually evaporated. Despite massive central bank support operations and purchases of key assets, many financial markets remained impaired...

Contingent convertible capital (CoCo) is a debt instrument that converts to equity or is written off if the issuing bank fails to meet a distress threshold. The conversion increases the issuer's loss-absorption capacity, but results in wealth transfers between CoCo holders and shareholders,...

This paper focuses on the defining the role of CRO in corporate governance and to show the interrelation between the way of CRO subordination and performance of investment bank. The sample consists of observations over a period of 2011 for 29 biggest investment banks (by amount of assets)...