@misc{NeisenBruhnLienland, author = {Neisen, Martin and Bruhn, Benjamin and Lienland, Dieter}, title = {ESG rating as input for a sustainability capital buffer}, series = {Journal of Risk Management in Financial Institutions}, volume = {Vol. 15}, journal = {Journal of Risk Management in Financial Institutions}, number = {1}, issn = {1752-8887}, pages = {72 -- 84}, abstract = {In this paper, we give a 'state of the art' overview of what ESG ratings are, which different types of these ratings can be distinguished and how they could be used in banking regulation to adjust banks' capital requirements with the goal to promote green finance and reduce climate-related risks within the investments of banks. Based on experience collected with other supporting factors within banking regulation, like the SME supporting factor, we show how a Green Supporting Factor or a Brown Penalty Factor could be implemented to promote green finance or punish brown finance, respectively, and include climate risk into Pillar I capital requirements. We also discuss an approach combining these two binary factors and conclude with a proposition to use ESG ratings to derive capital requirements add-ons. After all, ESG ratings take a broader perspective on sustainability and provide a more granular scale ranging from sustainable to non-sustainable rating classes. This approach ensures that green finance investments can be promoted via adjustments of capital requirements without a significant decrease of the total capital in the banking sector and, therefore, without the reduction of the stability of the financial market.}, language = {en} } @misc{NeisenBuettelSawahn, author = {Neisen, Martin and B{\"u}ttel, Peter and Sawahn, Wiebke}, title = {Regulatorische Agenda 2022 f{\"u}r Vorstand und Aufsichtsrat}, series = {Zeitschrift f{\"u}r das gesamte Kreditwesen - Digitaler Sonderdruck}, volume = {75}, journal = {Zeitschrift f{\"u}r das gesamte Kreditwesen - Digitaler Sonderdruck}, number = {3}, issn = {0341-4019}, pages = {1 -- 11}, language = {de} } @misc{NeisenSchulteMattler, author = {Neisen, Martin and Schulte-Mattler, Hermann}, title = {The effectiveness of IFRS 9 transitional provisions in limiting the potential impact of COVID-19 on banks}, series = {Journal of Banking Regulation}, volume = {2021}, journal = {Journal of Banking Regulation}, number = {22}, issn = {1745-6452}, doi = {10.1057/s41261-021-00151-7}, pages = {342 -- 351}, abstract = {The purpose of this paper is to assess the effectiveness of the transitional provisions for the impact of International Financial Reporting Standard 9 (IFRS 9) as a supervisory tool to strengthen a bank's capital base. The new IFRS 9 provisions are a significant banking supervisory measure of the so-called Capital Requirements Regulation (CRR) Quick Fix to mitigate possible adverse effects of the COVID-19 pandemic on banks. With the discharge rules, the supervisor aims to strengthen the banks' regulatory capital in order to ensure the supply of credit to households and companies at all times. Based on the published disclosure reports of 107 significant European banks at the reporting dates end 2019 and June 2020, our study analysed how many banks already apply the transition rules, whether there are geographical focusses and to what extent banks use the new CRR Quick Fix adjustments. To the best of our knowledge, this paper is the first empirical analysis of the extent to which European banks use the original IFRS 9 transitional arrangements and COVID-19 extension and what effects its use has on their common equity Tier 1 (CET1) capital. The results are of interest to regulators, bank managers and analysts alike, as they fundamentally demonstrate the effectiveness of this particular regulatory tool.}, language = {en} } @misc{NeisenSchulteMattler, author = {Neisen, Martin and Schulte-Mattler, Hermann}, title = {Eliminating the negative impacts of the Basel IV output floor by adjusting a bank's business model}, series = {Journal of Risk Management in Financial Institutions}, volume = {Vol. 14}, journal = {Journal of Risk Management in Financial Institutions}, number = {3}, issn = {1752-8887}, pages = {256 -- 267}, abstract = {The purpose of this paper is to show the interaction between the Basel IV output floor and business model management. Specifically, the paper analyses how banks can optimise the output floor by moderately adjusting the composition of their portfolio. The individual topics are explained based on simplified exemplary cases. The presented capital floor analysis may help a bank's top management to allocate the available capital better, formulate a coherent internal risk appetite, including the cost of capital in their pricing models, and set explicit targets for key performance drivers directly linked to the desired shareholder returns. With a target business model in mind, our approach can therefore be used to determine target levels for the individual risk positions that contribute to the output floor. The paper presents a procedure for overall bank management, particularly for business model planning in the presence of the Basel IV floor. Managers, analysts and regulators can apply our approach to analyse the business model of an individual bank, as well as the output floor of the banking sector as a whole. To our knowledge, our paper is the first academic contribution on the impact of the new prudential floor approach on the banks' business model.}, language = {en} } @misc{NeisenSchulteMattler, author = {Neisen, Martin and Schulte-Mattler, Hermann}, title = {CRD VI/CRR III: Die Umsetzung der Baseler Eigenmittelempfehlungen (Basel IV) in der Europ{\"a}ischen Union im {\"U}berblick}, series = {Zeitschrift f{\"u}r Wirtschafts- und Bankrecht}, volume = {76}, journal = {Zeitschrift f{\"u}r Wirtschafts- und Bankrecht}, number = {11}, issn = {0342-6971}, pages = {497 -- 548}, language = {de} } @misc{NeisenGeraskin, author = {Neisen, Martin and Geraskin, Petr}, title = {Improved credit default prediction using machine learning and its impact on risk-weighted assets of banks}, series = {Journal of AI, Robotics \& Workplace Automation}, volume = {Vol. 1}, journal = {Journal of AI, Robotics \& Workplace Automation}, number = {4}, issn = {2633-5638}, pages = {1 -- 14}, abstract = {The use of risk models, especially credit risk models, has been a standard for banks for many years. Banks use models not only for business decision purposes but also for regulatory purposes when comparing their risk with the available regulatory capital. Furthermore, banks need to efficiently allocate their capital in the current competitive and regulatory environments. As part of this process, they develop models to predict the probability of default (PD), which are further used to calculate risk-weighted assets (RWA). This paper gives an overview of how banks calculate RWA for credit risk. We compare the performance of traditional PD models based on logistic regression with a machine learning (ML) algorithm based on gradient boosting. This shows that an improvement in PD model performance by using ML algorithms can also lead to a decrease of RWA, therefore releasing additional capital for the banks. We developed and calibrated PD models based on logistic regression and light gradient boosting machine (GBM) approaches and compared them in terms of discriminatory power and the impact on RWA to prove this statement. This paper shows that the use of ML leads in our case study to an improvement in the model's discriminatory power of 5 per cent in terms of Gini and releasing RWA of approximately 6.5 per cent.}, language = {en} } @misc{NeisenSchulteMattler, author = {Neisen, Martin and Schulte-Mattler, Hermann}, title = {CRR III implementaion: Impact on capital requirements, performance and business models of European banks}, series = {Journal of Risk Management in Financial Institutions}, volume = {15}, journal = {Journal of Risk Management in Financial Institutions}, number = {4}, issn = {1752-8887}, pages = {338 -- 361}, abstract = {The European Banking Package II finalises the implementation of the final Basel III standards, which the industry refers to as 'Basel IV'. It entails many changes to the methods used to determine capital requirements and represents a significant challenge for the European banking sector. Based on the Capital Requirements Regulation (CRR) III draft, this paper provides an overview of the main implementation issues in the European Union, discusses the potential impact on banks' capital requirements and makes policy recommendations. This paper uses primary sources such as the Basel Committee on Banking Supervision, the European Banking Authority and the European Commission. Secondary sources, academic articles or analyses from various stakeholders are also included in the analysis. This paper also provides an analysis of the impact of the new prudential regulations on banks based on 30 detailed Basel IV impact studies conducted over the past two years in consulting projects with banks from almost all EU countries. The impact analysis covers a wide range of different business models, bank sizes and countries. We believe the anonymised data we use is far more representative of the EU banking system and other jurisdictions than the impact studies performed by the European Commission or the BCBS. The new CRR III regulations will pose strategic, operational and regulatory challenges for the banks concerned. The paper concludes that the European implementation of the reforms will not burden a specific group of banks, but banks with different business models and of different size will be impacted differently but still significantly. This makes Basel IV and CRR III unique compared to previous reforms of the Basel framework. The EU Commission's goal of proportionality of regulations will not provide much relief in this regard. The paper provides an up-to-date and comprehensive overview of the planned changes in CRR III, ie in capital adequacy requirements. It analyses the implementation of the standards and compares them with the Basel IV requirements. Recommendations for supervisors, risk management practitioners and other interested parties conclude the paper.}, language = {en} } @incollection{NeisenGogolinKroll, author = {Neisen, Martin and Gogolin, Fabian and Kroll, Sophie}, title = {Der Output-Floor}, series = {Basel IV und CRR 3}, booktitle = {Basel IV und CRR 3}, editor = {Neisen, Martin and R{\"o}th, Stefan}, edition = {3., aktualisierte Auflage}, publisher = {Bank Verlag GmbH}, address = {K{\"o}ln}, isbn = {978-3-86556-537-2}, pages = {227 -- 260}, language = {de} } @misc{NeisenBuettelSawahn, author = {Neisen, Martin and B{\"u}ttel, Peter and Sawahn, Wiebke}, title = {Die regulatorische Agenda 2023 f{\"u}r Vorstand und Aufsichtsrat}, series = {Zeitschrift f{\"u}r das gesamte Kreditwesen}, volume = {76}, journal = {Zeitschrift f{\"u}r das gesamte Kreditwesen}, number = {3, Digitaler Sonderdruck}, issn = {0341-4019}, language = {de} }