Is the Comprehensive Assessment able to capture banks’ risks?

Emilio Barucci, Roberto Baviera and Carlo Milani ()

Finance Research Letters, 2016, vol. 19, issue C, 98-104

Abstract: We evaluate the Comprehensive Assessment by analysing the database made available by the European Central Bank. We show that the capital deficit of a bank identified by the Comprehensive Assessment is positively related to a market-based risk measure of the bank, such as its historical volatility, and that the post-adjustment leverage ratio, but not the pre-adjustment leverage ratio or the risk-weighted capital ratio, is related to it. These results show that the Comprehensive Assessment captures banks’ riskiness and that the leverage ratio is a better indicator than the risk-weighted capital ratio.

Keywords: Bank regulation; Stress test; Capital; Sovereign risk; European Central Bank (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:19:y:2016:i:c:p:98-104

DOI: 10.1016/j.frl.2016.06.010

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