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How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis

2012-01-01 Business & Economics
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Release : 2012-01-01
Genre : Business & Economics
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Book Rating : 797/5 ( reviews)

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Book Synopsis How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis by : Mr.Sonali Das

Download or read book How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis written by Mr.Sonali Das. This book was released on 2012-01-01. Available in PDF, EPUB and Kindle. Book excerpt: We study how investors account for the riskiness of banks' risk-weighted assets (RWA) by examining the determinants of stock returns and market measures of risk. We find that banks with higher RWA had lower stock returns over the US and European crises. This relationship is weaker in Europe where banks can use Basel II internal risk models. For large banks, investors paid less attention to RWA and rewarded instead lower wholesale funding and better asset quality. RWA do not, in general, predict market measures of risk although there is evidence of a positive relationship before the US crisis which becomes negative afterwards.

How Risky are Banks' Risk Weighted Assets? Evidence from the Financial Crisis

2015
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Release : 2015
Genre :
Kind : eBook
Book Rating : /5 ( reviews)

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Book Synopsis How Risky are Banks' Risk Weighted Assets? Evidence from the Financial Crisis by : Sonali Das

Download or read book How Risky are Banks' Risk Weighted Assets? Evidence from the Financial Crisis written by Sonali Das. This book was released on 2015. Available in PDF, EPUB and Kindle. Book excerpt: We study how investors account for the riskiness of banks' risk-weighted assets (RWA) by examining the determinants of stock returns and market measures of risk. We find that banks with higher RWA had lower stock returns over the US and European crises. This relationship is weaker in Europe where banks can use Basel II internal risk models. For large banks, investors paid less attention to RWA and rewarded instead lower wholesale funding and better asset quality. RWA do not, in general, predict market measures of risk although there is evidence of a positive relationship before the US crisis which becomes negative afterwards.

Revisiting Risk-Weighted Assets

2012-03-01 Business & Economics
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Release : 2012-03-01
Genre : Business & Economics
Kind : eBook
Book Rating : 656/5 ( reviews)

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Book Synopsis Revisiting Risk-Weighted Assets by : Vanessa Le Leslé

Download or read book Revisiting Risk-Weighted Assets written by Vanessa Le Leslé. This book was released on 2012-03-01. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.

Heterogeneity of Bank Risk Weights in the EU

2017-06-09 Business & Economics
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Release : 2017-06-09
Genre : Business & Economics
Kind : eBook
Book Rating : 958/5 ( reviews)

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Book Synopsis Heterogeneity of Bank Risk Weights in the EU by : Rima Turk-Ariss

Download or read book Heterogeneity of Bank Risk Weights in the EU written by Rima Turk-Ariss. This book was released on 2017-06-09. Available in PDF, EPUB and Kindle. Book excerpt: Concerns about excessive variability in bank risk weights have prompted their review by regulators. This paper provides prima facie evidence on the extent of risk weight heterogeneity across broad asset classes and by country of counterparty for major banks in the European Union using internal models. It also finds that corporate risk weights are sensitive to the riskiness of an average representative firm, but not to a market indicator of a firm’s probablity of default. Under plausible yet severe hypothetical scenarios for harmonized risk weights, counterfactual capital ratios would decline significantly for some banks, but they would not experience a shortfall relative to Basel III’s minimum requirements. This, however, does not preclude falling short of meeting additional national supervisory capital requirements.

Bank Funding Structures and Risk

2012-01-01 Business & Economics
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Release : 2012-01-01
Genre : Business & Economics
Kind : eBook
Book Rating : 142/5 ( reviews)

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Book Synopsis Bank Funding Structures and Risk by : Mr.Francisco F. Vazquez

Download or read book Bank Funding Structures and Risk written by Mr.Francisco F. Vazquez. This book was released on 2012-01-01. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the evolution of bank funding structures in the run up to the global financial crisis and studies the implications for financial stability, exploiting a bank-level dataset that covers about 11,000 banks in the U.S. and Europe during 2001?09. The results show that banks with weaker structural liquidity and higher leverage in the pre-crisis period were more likely to fail afterward. The likelihood of bank failure also increases with bank risk-taking. In the cross-section, the smaller domestically-oriented banks were relatively more vulnerable to liquidity risk, while the large cross-border banks were more susceptible to solvency risk due to excessive leverage. The results support the proposed Basel III regulations on structural liquidity and leverage, but suggest that emphasis should be placed on the latter, particularly for the systemically-important institutions. Macroeconomic and monetary conditions are also shown to be related with the likelihood of bank failure, providing a case for the introduction of a macro-prudential approach to banking regulation.

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