Understanding and quantifying the model risk inherent in loss projection models used in the macroeconomic stress testing and impairment estimation is of significant concern for both banks and regulators. The application of relative entropy techniques allow model misspecification robustness to be...

We study an optimal disclosure policy of a regulator that has information about banks (e.g., from conducting stress tests). In our model, disclosure can destroy risk-sharing opportunities for banks (the Hirshleifer effect). Yet, in some cases, some level of disclosure is necessary for risk...

Banks' holding of reasonable capital buffers in excess of minimum requirements could alleviate the procyclicality problem potentially exacerbated by the rating-sensitive capital charges of Basel II. Determining the required buffer size is an important risk management issue for banks, which the...

Introduction -- Disclosure regulation for transparency, stability, and competition in banking -- Bank risk disclosure: towards mandatory non-financial information -- Climate change risk: the new frontier in banking disclosure -- Do transparent banks do more green lending? Evidence from climate...

Since the 2007-09 crisis, increasing attention has been devoted to capital adequacy and balance sheet integrity. Banks have been required to improve the quality of their own funds, strengthen their liquidity structure, and enforce their risk management processes. This paper serves the purpose of...

Stress tests are assessments conducted by regulators to determine whether banks have sufficient capital buffers to withstand severe recessions. Unlike ordinary bank examinations, stress tests involve forward-looking scenarios and their results are publicly disclosed. This paper is the first...

A stress test of a nominal Islamic bank demonstrated that the liabilities structure which ensures the maximal bank resilience to shocks is the one featuring prevalence of debt financing. On the other hand, the assets structure which ensures the maximal bank resilience to shocks is either the...