Bank–insurer–firm tripartite interconnectedness of credit risk exposures in a cross-shareholding network
Masayasu Kanno ()
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Masayasu Kanno: Nihon University
Risk Management, 2018, vol. 20, issue 4, 273-303
Abstract This study assesses the interconnectedness of credit risk exposures in a tripartite network of cross-shareholdings among banks, insurers, and firms in Japan’s stock market during the fiscal years 2008–2015. We use consistent measures: credit risk exposure by PD (probability of default)/LGD (loss given default) approach in Basel III and RORA (return on risk-weighted assets). We conduct a credit risk analysis of the risk exposures in the cross-shareholdings. The result shows that by following the PD/LGD approach, the credit risk weights become approximately 1.5–5 times as large as by the transitional risk weight method. The mean exposure-weighted risk for the firm’s shareholdings is 1.67 times as large as the bank’s and the insurer’s. We analyze the network structure of the cross-shareholdings using network centrality measures. Our analysis can provide each entity with important implications on credit risk management in their cross-shareholdings.
Keywords: Credit risk; Cross-shareholding; Interconnectedness; Return on risk-weighted assets (RORA); Centrality measure (search for similar items in EconPapers)
JEL-codes: G32 G10 D85 L14 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:pal:risman:v:20:y:2018:i:4:d:10.1057_s41283-018-0033-4
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