Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/217688 
Year of Publication: 
2019
Citation: 
[Journal:] Journal of Central Banking Theory and Practice [ISSN:] 2336-9205 [Volume:] 8 [Issue:] 3 [Publisher:] De Gruyter Open [Place:] Warsaw [Year:] 2019 [Pages:] 111-132
Publisher: 
De Gruyter Open, Warsaw
Abstract: 
The lack of portfolio granularity in terms of exposure has been shown to have important implications for the amount of a financial institution’s economic capital. Based on a numerical simulation model, we provide concrete examples of how granularity affects capital levels. We achieve this by following two simulation approaches, including a dynamic setup as a more realistic version of the analysis. We show that granularity has an indirect effect on the expected loss component. This could lead to significant changes in the competitive environment should banks consider adding a granularity adjustment to the estimated amount of capital and account for it in their pricing.
Subjects: 
Finance
Regulation
Basel
Granularity
Banks
Capital
Concentration
Risk
Corporate Exposures.
JEL: 
E58
G21
G28
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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