This paper addresses the trade-off between additional loss-absorbing capacity and potentially higher bank risk … increase their risk-taking. This increase in risk-taking however, should be more than outweighed by the benefits of higher …

choose both asset volatility and leverage, and identify how monetary policy transmits to bank risk. Subsequently, we … introduce a regulator whose tool is a risk-based capital requirement. We derive from welfare that the regulator trades off bank … risk and credit supply, and show that monetary policy affects both sides of this trade-off. Hence, regulation cannot …

measurement of credit risk by financial institutions. Model-based regulation was meant to enhance the stability of the financial … sector by making capital charges more sensitive to risk. Exploiting the introduction of the model-based approach in Germany … and the richness of our loan-level data set, we show that:(1) internal risk estimates employed for regulatory purposes …

supervision reduces credit supply to firms with very high ex-ante and ex-post credit risk, while stimulating credit supply to … firms without loan delinquencies. Moreover, the increased risk-sensitivity of credit supply driven by centralised … crucial complementarities between supervision and monetary policy: centralised supervision offsets excessive bank risk …

European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the … analysis. We then analyse the risk and diversification in the sovereign bond portfolios of the largest European banks and … country. Finally, we evaluate the effect of diversification requirements on the tail risk of sovereign bond portfolios. Under …

This paper studies the impact of cyclical systemic risk on future bank profitability for a large representative panel … risk predict large drops in the average bank-level return on assets (ROA) with a lead time of 3-5 years. Based on quantile … local projections we further show that the negative impact of cyclical systemic risk on the left tail of the future bank …

Liquidity has its systemic aspect that is frequently neglected in research and risk management applications. We build a …

We study whether a pre-existing link between bank and sovereign credit risk biased euro area banks' sovereign debt … of the local sovereign exhibit larger purchases of domestic government bonds. These findings are consistent with 'risk … shifting' behaviour, where by investing in domestic government bonds banks earn the full, high risk premium while the risk is …