Measuring Excessive Risk-Taking in Banking

Jiri Podpiera and Laurent Weill

Czech Journal of Economics and Finance (Finance a uver), 2010, vol. 60, issue 4, 294-306

Abstract: In this paper the authors propose a new approach to the assessment of excessive risk-taking by a banking sector. They use the portfolio approach to assess the optimal risk-return combination of a bank’s portfolio, based on data for 32 categories of loans. It provides a benchmark for the optimality of the bank’s portfolio. The authors apply this method on an exhaustive sample of Czech banks for the period January 2005–February 2008. They observe an average excess of risk-taking of 33% of the optimal risk and a slight reduction of this excess risk over the analyzed period.

Keywords: bank; financial stability; risk-taking; transition countries (search for similar items in EconPapers)
JEL-codes: G21 G28 P20 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Measuring Excessive Risk-Taking in Banking (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:60:y:2010:i:4:p:294-306

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