The identification of high-risk factors of banks based on risk matrix

Abstract

Bank risk management is an important issue in the stability of financial system. How to select risk factors with great impact on banks has become a problem at present. Most of the previous studies have considered the disclosure frequency of the risk factors in the statements as the criterion of high-risk factors. This paper creatively constructs the two-dimensional risk matrix with frequency of risk factors and disclosure sentiment to divide these factors into three categories, high-risk category, mid-risk category and low-risk category. According to the financial statements of 95 American commercial banks from 2006 to 2020, 33 risk factors are determined, and three of them belong to high-risk category, called interest rate risk, regulatory risk and loan loss risk. These high-risk factors with more importance and more negative sentiment should be paid more attention in the future. management.