" A model is set up which assumes that banks’ decisions regarding capital and risk are made endogenously in a dynamic pattern."
"Contrary to the conventional wisdom, we find that the client tends to spend fewer corporate resources on precision with audit risk disclosure. As a result of lower precision, audit risk disclosure may lower the informativeness of audited financial reports, albeit ex-post communicating more information to the market. We also find that audit risk disclosure reduces the client's ex-ante payoff when the auditor bears a high misstatement cost due to audit failure."
"This paper considers the question from a non-technical point of view and surveys the regulatory requirements for capital adequacy contained in the so-called Basel framework. It analyses all contributing parts of the Capital Adequacy Ratio (CAR), including regulatory capital, credit risk, market risk and operational risk, raising in each case the concerns of the literature as well as recent contributions."
"We argue that simply pooling data across banks treats banks equally but is subject to two deficiencies: it may distort the impact of legitimate portfolio features, and it is vulnerable to implicit misdirection of legitimate information to infer bank identity. We compare various notions of regression fairness to address these deficiencies, considering both forecast accuracy and equal treatment. In the setting of linear models, we argue for estimating and then discarding centered bank fixed effects as preferable to simply ignoring differences across banks."
"Economic theory suggests that insurers should prioritize underwriting over investment as a source of income. We find that many U.S. non-life insurers conform to theory: they consistently earn high returns on underwriting and have relatively low-risk investment portfolios. A subset of insurers, however, do the opposite: they consistently earn low returns on underwriting and have relatively high-risk investment portfolios."
"Drawing on recently disclosed information on the Pillar 2 capital requirements of banks directly supervised by the ECB, we find that bank-specific capital requirements are mostly driven by business model and profitability, credit risk, and internal governance and risk management issues. Moreover, we propose a novel measure of bank governance quality that teases out the qualitative dimension of the P2R decision."
"We conclude that the purchase of cyber insurance is indicative of an overall higher risk profile, but that having that insurance after experiencing a breach and formalizing cyber risk oversight within the audit committee reduces auditors’ perceptions of risk."
"Because of the specific nature of a life insurer's business model, the impact of the ESG level on the expected return of life insurers can substantially differ from the corresponding impact for classical investors."
"... the security risks of teleworking are considered. Interviews were conducted with a number of industry professionals and specialist cybercrime police officers to form a sense of the challenges raised by teleworking."
"Our results confirm that the publication of capital requirements can have a disciplinary effect since banks publishing their requirements tend to have more robust capital ratios, which improves market discipline and financial stability."