The manipulation of basel risk-weights
| Autor: | Ouarda Merrouche, Mike Mariathasan |
|---|---|
| Přispěvatelé: | EconomiX, Université Paris Nanterre (UPN)-Centre National de la Recherche Scientifique (CNRS) |
| Rok vydání: | 2014 |
| Předmět: |
Economics and Econometrics
Basel I Impact factor business.industry Basel II capital regulation internal ratings-based approach education Control (management) jel:G20 Financial system Accounting Oecd countries [SHS.ECO]Humanities and Social Sciences/Economics and Finance jel:G21 humanities jel:G28 health services administration Internal ratings-based approach [No keyword available] Risk-weighted asset Economics Asset (economics) business health care economics and organizations Finance |
| Zdroj: | Journal of Financial Intermediation Journal of Financial Intermediation, Elsevier, 2014, 23 (3), pp.300-321. ⟨10.1016/j.jfi.2014.04.004⟩ Journal of Financial Intermediation, Elsevier, 2014 Journal of Financial Intermediation, 2014, 23 (3), pp.300-321. ⟨10.1016/j.jfi.2014.04.004⟩ |
| ISSN: | 1042-9573 1096-0473 |
| DOI: | 10.1016/j.jfi.2014.04.004 |
| Popis: | In this paper, we examine the relationship between banks’ approval for the internal ratings-based (IRB) approaches of Basel II and the ratio of risk-weighted assets to total assets. Analysing a panel of 115 banks from 21 OECD countries that were eventually approved for applying the IRB to their credit portfolio, we find that risk-weight density becomes lower once regulatory approval is granted. The effect persists when we control for asset structure, and we provide evidence showing that this phenomenon cannot be explained by modelling choices, or improved risk-measurement alone. Consistent with theories of risk-weight manipulation, we find the decline in risk-weights to be particularly pronounced among weakly capitalised banks, where the legal framework for supervision is weak, and in countries where supervisors are overseeing many IRB banks. We conclude that part of the decline in reported riskiness under the IRB results from banks’ strategic risk-modelling. |
| Databáze: | OpenAIRE |
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