Although risk culture is a key element in the risk management process, identifying the riskculture of a firm can be challenging due to the abstract concept of culture. We introduce textmining and unsupervised machine learning algorithms to define the risk culture for U.S. bankholding companies...

Using supervisory data from large U.S. bank holding companies (BHCs), we document that BHCs suffer more operational losses during episodes of extreme storms. Among different operational loss types, losses due to external fraud, BHCs' failure to meet obligations to clients and faulty business...

This paper builds a framework to quantify the financial stability implications of climate-related transition risk in Colombia. We explore risks imposed on the banking system based on scenarios of an increase in the domestic carbon tax by using bank- and firm-level data. Focusing on the...

Stress testing has become a tool of choice in banking for risk managers and regulators alike, and it is used more widely as a way to assess resilience to severely adverse events. Yet even the most creative risk manager would have been challenged to design a scenario that would have adequately...

Recent regulations of risk governance call for more outsiders on bank boards. We study how these affect bank risk taking (according to regulatory, economic, and tail risk measures) as well as board monitoring (CEO turnover) for 724 U.S. bank holding companies (BHC) from 2000 to 2019. We document...

Financial regulation has led banks to increase their equity ratios. Yet, several studies find that this has not led to a decrease in bank equity risk. We show theoretically, that keeping less capital in excess of the minimum capital requirement can outweigh the risk-reducing effect on equity of...

It has been shown in the empirical literature that operational losses of financial firms can cause severe reputational losses, which, however, are typically not taken into account when modeling and assessing operational risk. The aim of this paper is to fill this gap by assessing the...

We examine the risk-taking behavior of privatized banks prior to and after privatization and find that privatized banks experience a significant decrease in risk after privatization but they continue to exhibit higher risk taking than their rivals. This finding is consistent with the assertion...

We investigate financial intermediaries interest rate risk management as the simultaneous decision of on-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. Hausman exogeneity tests indicate that both decisions are...

Using a sample of banks operating in 24 countries, we provide robust evidence that stronger creditor rights are associated with higher capital adequacy ratios of conventional banks but not of Islamic banks. Such results are more effective on bank core capital, suggesting that bank managers tend...