By using the revenue model of the CAPM model, the paper focuses on the data of Industrial Bank and Bank of NINGBO, for the estimation of operational risk. The revenue model can reflect the size of the operational risk. The significant positive effect on net profit leverage of the two banks by non-performing loan cannot be neglected. Negative operating result caused by operational risk can be me...

Using the industrial organization approach to the microeconomics of banking we model a large (Monti-Klein) bank which is risk neutral and faces credit uncertainty in its loan business. The impact of capital adequacy regulation and the effect of changes in risk on deposit and loan rates are analyzed. We then show that capital adequacy regulation induces the bank to behave as if it were risk aver...

A risk inventory provides an integrated view on risk management artifacts, e.g., risks, risk controls, and performance indicators. In this paper, we show how adapting the enterprise architecture management processes (EAM) may provide a foundation for an integrated IT risk inventory. Based on a design research approach, we develop a systematic approach for integrating the disciplines of risk man...

The most important tool for promoting the bank’s stability and health is the establishment of a standard corporate governance structure for managing the bank's business. Redesigning the relationships between bank management, shareholders and the rest of the bank’s stockholder, including the objectives, the risk and audit indices, and internal control of the bank, is recognized as the foundation...

The article proposes a model of credit risk assessment on the basis of factor analysis of retail clients / borrowers in order to ensure predictive control of the level of risk posed by potential clients in commercial banks engaged in consumer lending. The aim of the study is to determine the level of risk represented by different groups (classes) of retail clients (borrowers) in order to reduce...

We delineate the impact of derivatives trading on asset risk for Canadian banks over the period starting 1997 till the fallout of the bank crisis in 2007. In light of the remarkable resilience of Canadian banks in dodging the current financial turmoil, we investigate whether such bank stability is attributable to effective risk management through derivatives use. After imputing asset risk from ...

Using banks’ internal models for regulatory purposes, while aimed at making capital requirements more accurate, invites regulatory arbitrage. I develop a framework to study the strategic selection of risk models, and derive predictions in line with recent empirical evidence. I also study optimal regulations. Penalizing banks with low risk-weights when they suffer abnormal losses is a powerful t...

Large value payment and securities settlement systems are important components of an economy's nancial system. Many such systems are operated by central banks and are liquidity intensive. Central banks often provide inexpensive liquidity to facilitate settlement. This leads to a number of policy questions about the provision of such liquidity. To answer these questions, central banks need to un...

We examine how the banking sector may ignite the formation of asset price bubbles when there is access to abundant liquidity. Inside banks, given limited liability and lack of observability of effort, loan officers (or risk takers) are compensated based on the volume of loans. Outside banks, when there is heightened macroeconomic risk, investors reduce direct investment and hold more bank depos...