Annals of Finance

, Volume 1, Issue 2, pp 197–224

A risk assessment model for banks

  • Charles A.E. Goodhart
  • Pojanart Sunirand
  • Dimitrios P. Tsomocos

DOI: 10.1007/s10436-004-0006-3

Cite this article as:
Goodhart, C., Sunirand, P. & Tsomocos, D. Annals of Finance (2005) 1: 197. doi:10.1007/s10436-004-0006-3


This paper proposes a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction among banks, where the actual risk an individual bank bears also depends on its interaction with other banks and investors. We develop a two-period general equilibrium model with three active heterogeneous banks, incomplete markets, and endogenous default. The model is calibrated against UK banking data and therefore can be implemented as a risk assessment tool for regulators and central banks. We address the impact of monetary and regulatory policy, credit and capital shocks in the real and financial sectors.


Financial fragility Financial contagion Systemic risk Banks Monetary policy Regulatory policy Equilibrium analysis 

Jel classification Numbers:

C68 E4 E5 G11 G21 

Copyright information

© Springer-Verlag Berlin Heidelberg 2005

Authors and Affiliations

  • Charles A.E. Goodhart
    • 1
    • 4
  • Pojanart Sunirand
    • 2
    • 5
  • Dimitrios P. Tsomocos
    • 3
    • 6
    • 7
  1. 1.Bank of EnglandLondonUK
  2. 2.Bank of EnglandLondonUK
  3. 3.Bank of EnglandLondonUK
  4. 4.London School of Economics, and Financial Markets GroupLondonUK
  5. 5.London School of EconomicsLondonUK
  6. 6.Said Business School and St. Edmund HallUniversity of OxfordOxfordUK
  7. 7.Financial Markets GroupLondonUK

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