The Effects of the Financial Crisis and Basel III on Banks’ Risk Disclosure: A Textual Analysis
19 Pages Posted: 11 Sep 2022
Date Written: August 26, 2022
We study the effects of the 2008 crisis and Basel III guidelines on the content of the financial reports of Israeli banks, which are highly regulated and follow the Basel guidelines. Our findings, based on LDA topic modeling and term frequency, indicate that already at the time of the crisis Israeli banks had shifted the focus of their reports from market and operational risks to credit and liquidity risks. The introduction of Basel III amplified this trend, such that the reports focused on the new regulations of leverage and liquidity coverage ratios, while neglecting market risk and VaR methods.
Keywords: Topic modeling, LDA, Financial crisis, Basel III, Banks, Financial Reports
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