 How the Four Asian Tigers navigate systemic risk: A Basel framework perspectiveBaolin Ma, Siqintana,, Kung-Cheng Ho and Shih-Cheng Lee International Review of Financial Analysis, 2025, vol. 107, issue C Abstract: The Basel Framework serves as a guiding model for mitigating risks within corporate systems and aligning financing standards for cross-border financial intermediaries. Following the widespread adoption of the Basel Accords, financial institutions in Asia have increasingly prioritized credit risk management and maintaining adequate capital buffers. Through a review and risk analysis of 26 years of data from 54,477 corporations across the Four Asian Tigers regions, this study finds evidence that undiversifiable systemic risk in overseas investment and financing activities can lead to higher-than-expected losses. The significant increase in systemic risk observed in the Four Asian Tigers regions during the 2008 financial crisis underscores the importance of risk diversification mechanisms, such as credit insurance, which enable banks to distribute their risks through multiple investments and financing channels, as well as managing their capital adequacy ratios through asset selection and management. Furthermore, our analysis suggests that as corporations and industries expand, associated increases in systemic risk may be mitigated through asset-light business strategies, potentially reducing expected losses for asset-heavy corporations and industries. It shows that asymmetrical procyclicality observed in the systemic risk of corporations within the Four Asian Tigers regions must be carefully considered. To this point, this study shows when there is an increase in expected loss due to overseas investment and financial projects during a recession causes banks to increase their capital by reducing their risk-weighted assets (e.g., loans and investments), which can exacerbate international financial crises. Therefore, our findings support the need for a macroscopic early warning system to monitor individual regions and enhance existing risk control mechanisms, contributing to the overall goals of the Basel Framework. Keywords: Basel Framework; Asset correlations; systemic risks; Four Asian Tigers (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:107:y:2025:i:c:s1057521925006805 DOI: 10.1016/j.irfa.2025.104593 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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