Bank risk aggregation based on the triple perspectives of bank managers, credit raters, and financial analysts

Abstract

Previous studies have incorporated only textual risk information disclosed by bank managers into bank risk aggregation. Besides bank managers, credit raters and financial analysts are important sources of risk information. Thus, this study expands the sources of textual risk disclosures in bank risk aggregation to include the triple perspectives of bank managers, credit raters, and financial analysts to obtain more reasonable bank risk aggregation results. By aggregating credit, market, and operational risk in the U.S. banking system, we find that disregarding textual risk disclosures from credit rating reports and financial analyst reports leads to biased bank risk aggregation results.