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Does Regulatory Pressure Affect ICAAP and Banks' Risk Management? The European Experience 

August 4, 2015


The financial crisis and the heavy losses in the banking and financial markets during last few years have shocked bankers and regulators. Many have asked why financial regulation, including the Basel II framework, was unable to prevent the crisis; why minimum capital requirements were inadequate for the control and management of risk; and how financial regulation must evolve in order to prevent this meltdown [Opplinger and Martin (2009)].

Regulation is fundamental for banking activities and for the role of financial institutions. Banks need to be regulated and supervisory authorities must play a relevant role in keeping financial institutions safe and sound.

As capital is a topic of never-ending relevance, capital regulation, in particular, is at the heart of prudential regulation and aims to ensure that banks hold an adequate level of capital consistent with their risk appetite and risk exposure.

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