Sophistication in risk management and banking stability. The long term

Gersbach H, Wenzelburger J (2006) Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld.
Bielefeld: Universität Bielefeld.

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We investigate the question of whether sophistication in risk management fosters banking stability. We compare a simple banking system in which an average rating is used with a sophisticated banking system in which banks are able to assess the default risk of entrepreneurs individually. Both banking systems compete for deposits, loans, and equity. While a sophisticated system rewards entrepreneurs with low default risks by low loan interest rates, a simple system acquires more equity and finances more entrepreneurs. Expected repayments in a simple system are always higher and its default risk is lower if productivity is sufficiently high.
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Gersbach H, Wenzelburger J. Sophistication in risk management and banking stability. The long term. Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld. Bielefeld: Universität Bielefeld; 2006.
Gersbach, H., & Wenzelburger, J. (2006). Sophistication in risk management and banking stability. The long term (Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld). Bielefeld: Universität Bielefeld.
Gersbach, H., and Wenzelburger, J. (2006). Sophistication in risk management and banking stability. The long term. Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld.
Gersbach, H., & Wenzelburger, J., 2006. Sophistication in risk management and banking stability. The long term, Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld.
H. Gersbach and J. Wenzelburger, Sophistication in risk management and banking stability. The long term, Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld, 2006.
Gersbach, H., Wenzelburger, J.: Sophistication in risk management and banking stability. The long term. Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld. Universität Bielefeld, Bielefeld (2006).
Gersbach, Hans, and Wenzelburger, Jan. Sophistication in risk management and banking stability. The long term. Bielefeld: Universität Bielefeld, 2006. Discussion paper / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld.
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