The Determinants of the Riskiness of Banks

  • Adrian Blundell-Wignall
  • Paul Atkinson
  • Caroline Roulet


The authors argue that settling the issue of what reforms are required must be based on empirical evidence. They first set out the key bank risks, including those associated with collateralised agreements at the heart of complexity and interdependence problems. They point out that in normal times these risk positions mostly cancel out (one’s loss being another’s gain), but when risk is mispriced these positions become pro-cyclical, correlated and concentrated activities involving chains of counterparties that create interconnectedness risk. The authors choose bank distance-to-default (DTD) data as their dependent variable and show that 4 business model features have a much stronger impact on risk than any capital rule: the size of (un-netted) derivatives, the extent wholesale securities financing, the availability of liquid assets and a measure of interdependence.


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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Adrian Blundell-Wignall
    • 1
  • Paul Atkinson
    • 2
  • Caroline Roulet
    • 3
  1. 1.University of Sydney and OECD (consultant advisor to the Secretary General, and former Director of the Financial and Enterprise Affairs Directorate)ParisFrance
  2. 2.NHA Economics, Ltd.ParisFrance
  3. 3.Organisation for Economic Co-operation and DevelopmentParisFrance

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