RISK INTEGRATION MECHANISMS AND APPROACHES IN BANKING INDUSTRY

Abstract

Recently, the number of consultative documents and research papers that discuss risk integration has grown considerably. This paper presents a comprehensive review of the work done on risk integration in the banking industry. This survey includes: (1) risk integration methods within regulatory frameworks and the banking industry; (2) challenges of risk integration; (3) risk interaction mechanisms; (4) development of risk integration approaches; (5) risk interaction results: diversification versus compounding effects; and (6) some future research topics in risk integration. We seek to understand developments in modeling risk integration, particularly in light of the global financial crisis of 2008 and important future research topics that emerge from both the literature and the banking industry.