Proposal for calculating capital requirements for concentration risk
Working paper warns “inadequate reflection” on concentration risk can lead to banks holding too little capital
"Inadequate reflection" on the concentration risk in banks' credit portfolios can lead to "insufficient capital levels", even when the ratios seem high, warns a working paper published by the International Monetary Fund.
In Measuring Concentration Risk - A Partial Portfolio Approach, Pierpaolo Grippa and Lucyna Gornicka argue concentration risk is "an important feature of many banking sectors, especially in emerging and small economies".
The authors note that under the Basel framework, banks are
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