{"id":27066,"date":"2015-05-13T07:00:57","date_gmt":"2015-05-13T05:00:57","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=27066"},"modified":"2015-05-13T16:46:17","modified_gmt":"2015-05-13T14:46:17","slug":"27066","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/27066\/","title":{"rendered":"Under-Reporting Bank Risk"},"content":{"rendered":"

Taylor Begley writes;:\u00a0 A key regulatory response to the Global Crisis has involved higher risk-weighted capital requirements. This column documents systematic under-reporting of risk by banks that gets worse when the system is under stress. Thus banks\u2019 self-reported levels of risk are least informative in states of the world when accurate risk measurement matters the most.<\/span><\/p>\n

Following the Global Crisis, there has been a great deal of debate surrounding the risk-taking behaviour and incentives of large, global banks and their potential consequences for the stability of the financial system. Some argue that the privately optimal level of capital for a bank may differ substantially from the socially efficient capital level (see Admati et al. 2011, Thakor 2014). As policymakers consider new micro- and macro-prudential regulations to address these problems, it is important to understand the accuracy of self-reported risk measures generated by the internal models of large banks around the globe.<\/span><\/p>\n

The measurement of bank risk is a key foundation for both micro-prudential and macro-prudential policy. Effective regulation relies on understanding the location and size of risks in the financial sector. In this column, we highlight a strong relationship between bank capitalisation and the risk reporting behaviour of banks under the current regulatory framework. Banks with low equity capital under-report their trading book risk, and do so more severely in times of system-wide financial stress. These results suggest that banks\u2019 self-reported risk measures are least informative precisely during periods when accurate risk measurement is most important.\u00a0 Bank Risk<\/strong><\/a>
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Taylor Begley writes;:\u00a0 A key regulatory response to the Global Crisis has involved higher risk-weighted capital requirements. This column documents systematic under-reporting of risk by banks that gets worse when the system is under stress. Thus banks\u2019 self-reported levels of … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[70,13],"tags":[],"class_list":["post-27066","post","type-post","status-publish","format-standard","hentry","category-big-banks","category-finance"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t