The United States is now committed to using two relatively sophisticated approaches to measuring capital adequacy: Basel III and stress tests. This paper shows how stress testing could mitigate weaknesses in the way Basel III measures credit and interest rate risk, the way it measures bank...

The Basel capital adequacy ratios lost credibility with financial markets during the crisis. This paper argues that failure was the result of the reliance of the Basel standards on overstated asset values in reported equity capital. The United States' stress tests were able to assist in...

There is a paucity of research on the impact of domestic M&As on bank risk profiles. This paper exploits a rich database of Spanish banks during 1986-2010 to study the changes in bank risk profiles immediately before and after domestic M&As. Our results control for potential selection bias and...

We analyze the impact of incentive mechanisms embedded in executive remuneration contracts on the risk choices made by bank CEOs. For a panel of US and European banks, we employ the Merton distance to default model to estimate how bonus payments and option holdings impact the level of bank...