366
Views
3
CrossRef citations to date
0
Altmetric
Research Article

The risk sensitivity of Basel risk weights and loan loss provisions: evidence from European banks

&
Pages 1855-1886 | Received 09 Jun 2020, Accepted 07 Apr 2021, Published online: 28 Apr 2021

References

  • Ahmed, A. S., C. Takeda, and S. Thomas. 1999. “Bank Loan Loss Provisions: A Reexamination of Capital Management, Earnings Management and Signaling Effects.” Journal of Accounting and Economics 28: 1–25.
  • Basel Committee on Banking Supervision. 1988. “International Convergence of Capital Measurement and Capital Standards.” Basel.
  • Basel Committee on Banking Supervision. 2004. “International Convergence of Capital Measurement and Capital Standards: A Revised Framework.” Basel.
  • Basel Committee on Banking Supervision. 2010. “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems.” Basel.
  • Basel Committee on Banking Supervision. 2013a. “Regulatory Consistency Assessment Programme (RCAP) – Analysis of Risk-Weighted Assets for Credit Risk in the Banking Book.” Basel.
  • Basel Committee on Banking Supervision. 2013b. “The Regulatory Framework: Balancing Risk Sensitivity, Simplicity and Comparability.” Basel.
  • Basel Committee on Banking Supervision. 2017. “Basel III: Finalising Post-Crisis Reforms.” Basel.
  • Baule, R., and C. Tallau. 2016. “Revisiting Basel Risk Weights – Cross-Sectional Risk Sensitivity and Cyclicality.” Journal of Business Economics 86: 905–931.
  • Berger, A. N., R. J. Herring, and G. P. Szegö. 1995. “The Role of Capital in Financial Institutions.” Journal of Banking & Finance 19: 393–430.
  • Bikker, J. A., and P. A. Metzemakers. 2005. “Bank Provisioning Behaviour and Procyclicality.” Journal of International Financial Markets, Institutions and Money 15: 141–157.
  • Blundell-Wignall, A., and C. Roulet. 2013. “Bank Lending Puzzles: Business Models and the Responsiveness to Policy.” OECD Journal: Financial Market Trends 104: 7–30.
  • Bushman, R. M., and C. D. Williams. 2012. “Accounting Discretion, Loan Loss Provisioning, and Discipline of Banks' Risk-Taking.” Journal of Accounting and Economics 54: 1–18.
  • Collins, J., D. Shackelford, and J. Wahlen. 1995. “Bank Differences in the Coordination of Regulatory Capital, Earnings, and Taxes.” Journal of Accounting Research 33: 263–291.
  • Cucinelli, D., M. L. Di Battista, M. Marchese, and L. Nieri. 2018. “Credit Risk in European Banks: The Bright Side of the Internal Ratings Based Approach.” Journal of Banking and Finance 93: 213–229.
  • Cummings, J. R., and K. J. Durrani. 2016. “Effect of the Basel Accord Capital Requirements on the Loan-Loss Provisioning Practices of Australian Banks.” Journal of Banking & Finance 67: 23–36.
  • Ferri, G., and V. Pesic. 2017. “Bank Regulatory Arbitrage Via Risk Weighted Assets Dispersion.” Journal of Financial Stability 33: 331–345.
  • Financial Stability Board. 2009. “Report of the Financial Stability Forum on Addressing Procyclicality in the Financial System.”
  • Flannery, M. J. 2014. “Maintaining Adequate Bank Capital.” Journal of Money, Credit and Banking 46: 157–180.
  • Flannery, M. J., and E. Giacomini. 2015. “Maintaining Adequate Bank Capital: An Empirical Analysis of the Supervision of European Banks.” Journal of Banking & Finance 59: 236–249.
  • Flannery, M. J., and K. P. Rangan. 2008. “What Caused the Bank Capital Build-up of the 1990s?” Review of Finance 12: 391–429.
  • Flannery, M. J., and S. M. Sorescu. 1996. “Evidence of Bank Market Discipline in Subordinated Debenture Yields.” Journal of Finance 51: 1347–1377.
  • Gaston, E., and I. W. Song. 2014. “Supervisory Roles in Loan Loss Provisioning in Countries Implementing IFRS.” Working Paper, International Monetary Fund (IMF).
  • Gordy, M. B., and B. Howells. 2006. “Procyclicality in Basel II: Can We Treat the Disease Without Killing the Patient?” Journal of Financial Intermediation 15: 395–417.
  • Hellwig, M. 2010. “Capital Regulation After the Crisis: Business as Usual?” Working Paper, Max Planck Institute for Research on Collective Goods.
  • Kashyap, A. K., and J. C. Stein. 2004. “Cyclical Implications of the Basel II Capital Standards.” Economic Perspectives 28: 18–31.
  • Kim, M., and W. Kross. 1998. “The Impact of the 1989 Change in Bank Capital Standards on Loan Loss Provisions and Loan Write-Offs.” Journal of Accounting and Economics 25: 69–99.
  • Krüger, S., D. Rösch, and H. Scheule. 2018. “The Impact of Loan Loss Provisioning on Bank Capital Requirements.” Journal of Financial Stability 36: 114–129.
  • Kund, A.-G., and F. Neitzert. 2020. “Only Blunt Tools Left? How IFRS 9 Affects the Earnings and Capital Management of European Banks.” Working Paper, University of Cologne.
  • Laeven, L., and G. Majnoni. 2003. “Loan Loss Provisioning and Economic Slowdowns: Too Much, Too Late?” Journal of Financial Intermediation 12: 178–197.
  • Le Leslé, V., and S. Avramova. 2012. “Revisiting Risk-Weighted Assets: ‘Why do RWAs Differ Across Countries and What Can be Done About it’?”. Working Paper, International Monetary Fund (IMF).
  • Liu, C., S. Ryan, and J. Wahlen. 1997. “Differential Valuation Implications of Loan Loss Provisions Across Banks and Fiscal Quarters.” Accounting Review 72: 133–146.
  • Mariathasan, M., and O. Merrouche. 2014. “The Manipulation of Basel Risk-Weights.” Journal of Financial Intermediation 23: 300–321.
  • Merton, R. C. 1974. “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.” Journal of Finance 29: 449–470.
  • Montes, C. P., C. T. Artigas, M. E. Cristofoli, and N. L. San Segundo. 2018. “The Impact of the IRB Approach on the Risk Weights of European Banks.” Journal of Financial Stability 39: 147–166.
  • Olszak, M., M. Pipien, I. Kowalska, and S. Roszkowska. 2017. “What Drives Heterogeneity of Cyclicality of Loan-Loss Provisions in the EU?” Journal of Financial Services Research 51: 55–96.
  • Pérez, D., V. Salas-Fumás, and J. Saurina. 2008. “Earnings and Capital Management in Alternative Loan Loss Provision Regulatory Regimes.” European Accounting Review 17: 423–445.
  • Ronn, E. I., and A. K. Verma. 1986. “Pricing Risk-Adjusted Deposit Insurance: An Option-Based Model.” Journal of Finance 41: 871–895.
  • Shrieves, R. E., and D. Dahl. 1992. “The Relationship Between Risk and Capital in Commercial Banks.” Journal of Banking and Finance 16: 439–457.
  • Shrieves, R. E., and D. Dahl. 2003. “Discretionary Accounting and the Behavior of Japanese Banks Under Financial Distress.” Journal of Banking and Finance 27: 1219–1243.
  • Vallascas, F., and J. Hagendorff. 2013. “The Risk Sensitivity of Capital Requirements: Evidence From An International Sample of Large Banks.” Review of Finance 17: 1947–1988.
  • Vasicek, O. A. 1987. Probability of Loss on Loan Portfolio. San Francisco: KMV Corporation.
  • Wahlen, J. 1994. “The Nature of Information in Commercial Bank Loan Loss Disclosures.” The Accounting Review 69: 455–478.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.