Assessment of the Effect of Credit Risk on Stress Resilience of U.S. Commercial Banks in the Context of International Framework for Banking Regulation (Basel III)

During the post-crisis period the banking regulation of the credit risks has become stricter due to the growing concern about systemic risk and the growing complexity of the financial sector. The global financial crisis of 2008-2009 showed that insufficient control over the level of credit risk may devalue the efforts to reach financial stability, so that the international regulators had to develop and implement the international framework for banking regulation (Basel III) to increase the stress resilience of the banking sector. The document focuses particularly on the credit risk. The aim of the study presented is to assess the effect of credit risk on the stress resilience of the US banking sector in the context of the implementation of Basel III standards. With this aim, there were analyzed the impact of credit risk on the stress resilience of a commercial bank and on some of its other determinants, international experience in the implementation of Basel III framework and the impact of the reform on strengthening financial stability and reducing the threat of systemic risk. The assessment of the effect of credit risk in the context of increasing the stress resilience of the US banking sector was conducted using clusterization and discriminant analysis. As a result, the strong influence of credit risk and credit activity of a commercial bank on its stress resilience was revealed.