Measuring Excessive Risk-Taking in Banking
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.
Volume (Year): 60 (2010)
Issue (Month): 4 (November)
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- Hoggarth, Glenn & Reis, Ricardo & Saporta, Victoria, 2002.
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- Anca Pruteanu-Podpiera & Jiří Podpiera, 2008. "The Czech transition banking sector instability: the role of operational cost management," Economic Change and Restructuring, Springer, vol. 41(3), pages 209-219, September.
- Allen N. Berger & Robert DeYoung, 1997.
"Problem loans and cost efficiency in commercial banks,"
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1997-8, Board of Governors of the Federal Reserve System (U.S.).
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- Allen N. Berger & Robert DeYoung, 1995. "Problem Loans and Cost Efficiency in Commercial Banks," Center for Financial Institutions Working Papers 96-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Guttentag, Jack & Herring, Richard, 1984. " Credit Rationing and Financial Disorder," Journal of Finance, American Finance Association, vol. 39(5), pages 1359-82, December.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
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