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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