Competition and Risk Management of Financial Institutions

Main content

The Basel II Accord fosters sophistication in risk management and makes capital requirements risk-sensitive. Using a systemic approach, we analyze to what extent the Basel II rules are suitable for reaching the goals of stability and efficiency. In particular, we are concerned with the following issues:

  • How does sophistication in risk management affect banking stability and market conditions?
  • How does sophistication in risk management impact on the ability of banks to raise equity?
  • How should credit-portfolio-management tools account for the correlation effect, i.e., the fact that default correlations change in case of macroeconomic shocks?
  • How do risk-sensitive capital requirements affect banking stability?
  • What types of risk-sensitive capital requirements minimize the risk of bank crises?
  • How is competition among banks affected when some borrowers are shirkers?
  • How can commercial banks and investment banks coexist?


  • Default Correlations in the Merton Model, Review of Finance, European Finance Association, 18(5), 2014, 1775-1809.
    (Ulrich Erlenmaier and Hans Gersbach)
    Working Paper Version
  • Sophistication in Risk Management, Bank Equity, and Stability, International Review of Finance, 10(1), 2010, 63-91.
    (Hans Gersbach and Jan Wenzelburger)
    Working Paper Version
  • On the Coexistence of Banks and Markets, Scandinavian Journal of Economics, 109(2), 2007, 225-243.
    (Hans Gersbach and Harald Uhlig)
    Working Paper Version
  • Debt Contracts and Collapse as Competition Phenomena, Journal of Financial Intermediation, 15(4), 2006, 556-574.
    (Hans Gersbach and Harald Uhlig)
    Working Paper Version
  • Firm Defaults and the Correlation Effect, European Financial Management, 9 (3), 361-378, 2003.
    (Hans Gersbach and Alexander Lipponer)
    Working Paper Version

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