Risk-Based Capital Requirements and Optimal Liquidation in a Stress Scenario*

Archive ouverte : Article de revue

Braouezec, Yann | Wagalath, Lakshithe

Edité par HAL CCSD ; Oxford University Press (OUP): Policy F - Oxford Open Option D

International audience. We develop a simple yet realistic framework to analyze the impact of an exogenous shock on a bank’s balance-sheet and its optimal response when it is constrained to maintain its risk-based capital ratio above a regulatory threshold. We show that in a stress scenario, capital requirements may force the bank to shrink the size of its assets and we exhibit the bank’s optimal strategy as a function of regulatory risk-weights, asset market liquidity, and shock size. When financial markets are perfectly competitive, we show that the bank is always able to restore its capital ratio above the required one. However, for banks constrained to sell their loans at a discount and/or with a positive price impact when selling their marketable assets (large banks) we exhibit situations in which the deleveraging process generates a death spiral. We then show how to calibrate our model using annual reports of banks and study in detail the case of the French bank BNP Paribas. Finally, we suggest how our simple framework can be used to design a systemic capital surcharge.

Consulter en ligne

Suggestions

Du même auteur

Pour des stress-tests bancaires réglementaires plus transparents | Braouezec, Yann

Pour des stress-tests bancaires réglementaires plus transparents

Archive ouverte: Article de revue

Braouezec, Yann | 2018-02-23

International audience. Les auteurs proposent une méthode alternative de stress-tests, où les actifs de la banque sont directement stressés, qui prend en compte les éventuels effets de rétroaction (vente d’actifs, c...

Évaluation du risque systémique bancaire | Braouezec, Yann

Évaluation du risque systémique bancaire

Archive ouverte: Article de revue

Braouezec, Yann | 2016

Le Comité de Bâle a élaboré une méthodologie pour évaluer l’importance systémique d’une banque, qui se mesure par un score final fondé sur cinq indicateurs. Cette approche présente l’avantage d’être simple, mais elle confère à la ...

Strategic fire-sales and price-mediated contagion in the banking system | Braouezec, Yann

Strategic fire-sales and price-mediated contagion in the banking system

Archive ouverte: Article de revue

Braouezec, Yann | 2019-05

International audience. We consider a price-mediated contagion framework in which each bank, after an exogenous shock, may have to sell assets in order to comply with regulatory constraints. Interaction between bank...

Du même sujet

Ethics and cancer: main theme in human and social sciences in a first-degree medical course. Éthique et cancer: fil rouge dans une formation initiale de sciences humaines et sociales en médecine (PACES) | Aiguier, G.

Ethics and cancer: main theme in human and social sciences in a first-degre...

Archive ouverte: Article de revue

Aiguier, G. | 2013-06-15

International audience

Reinventing science and technology entrepreneurship education: The role of human and social capitals | Yami, Saïd

Reinventing science and technology entrepreneurship education: The role of ...

Archive ouverte: Article de revue

Yami, Saïd | 2021-03

International audience

« Conciliation vie privée vie professionnelle » : plusieurs termes pour une même réalité ? Proposition de modélisation à travers l’usage français | Verstaevel, N.

« Conciliation vie privée vie professionnelle » : plusieurs termes pour une...

Archive ouverte: Article de revue

Verstaevel, N. | 2020-12-31

The role of the leverage effect in the price discovery process of credit markets | Zimmermann, Paul

The role of the leverage effect in the price discovery process of credit ma...

Archive ouverte: Article de revue

Zimmermann, Paul | 2021-01-31

Combating climate change and controlling energy demand: introduction to the special section. Lutte contre le changement climatique et maîtrise de la demande d’énergie : introduction au dossier thématique | Aubrée, Loïc

Combating climate change and controlling energy demand: introduction to the...

Archive ouverte: Article de revue

Aubrée, Loïc | 2017-07-28

International audience

New indices to characterize drawing behavior in humans (Homo sapiens) and chimpanzees (Pan troglodytes). New indices to characterize drawing behavior in humans (Homo sapiens) and chimpanzees (Pan troglodytes): An innovative analysis to understand drawing behavior | Martinet, Lison

New indices to characterize drawing behavior in humans (Homo sapiens) and c...

Archive ouverte: Article de revue

Martinet, Lison | 2021

International audience

Chargement des enrichissements...