n South African Journal of Economic and Management Sciences - The effect of stressed economic conditions on credit risk in Basel II
|Article Title||The effect of stressed economic conditions on credit risk in Basel II|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Author||Ja'nel Esterhuysen, Gary Van Vuuren and Paul Styger|
|Publication Date||Jan 2011|
|Pages||122 - 137|
|Keyword(s)||Basel II, C46, Credit crisis, Credit risk, G21, G32, Loss and frequency distributions and North-West University|
ISI Social Science
The robustness of the Basel II accord in protecting banks during volatile economic periods has been challenged during the ongoing credit crisis. In particular, advanced approaches to measuring and managing credit risk have drawn criticism for being both irrelevant and too complex. Despite accusations that the accord was largely responsible for the crisis, this article explores which of Basel II's credit risk approaches were more successful in allocating capital. It was found that, in general, compliance with Basel II actually protected banks during the crisis, with simpler approaches enjoying greater success than more advanced ones in protecting banks against credit risk.
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