Document Type



Edith Cowan University

Place of Publication

Joondalup, Western Australia


Faculty of Business and Public Management


School of Accounting, Finance and Economics


Allen, D., Chandra, M., & Li Ping Yong (2004). How bank risk profiles affect their strength : an assessment of banks in the Asia-Pacific region. Joondalup, Australia: Edith Cowan University.


This paper analyses bank relative riskiness by testing the sensitivity of Asia-Pacific banks to overall market risk, global credit risk shocks, interest rate risk shocks and maturity risk shocks. The banks’ risk profiles are categorised according to their capitalisation levels and functional degree of diversification. Our results indicate that highly capitalised banks yield higher average stock returns whilst functionally diversified banks have less volatile returns. Generally, banks that adopt capital adequacy guidelines and hold higher capital levels have greater protection from these risks. Functionally diversified banks are also more strongly positioned against system-wide shocks to the banking sector.

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