Question
Fiscal banking authorities are closely monitoring the evolution of the structural risk in the banking industry. One respective indicator is the z-score. By definition, z-score
Fiscal banking authorities are closely monitoring the evolution of the structural risk in the banking industry. One respective indicator is the z-score. By definition, z-score is computed as return on assets plus equity-to-assets ratio divided by the standard deviation of return on assets. Please describe your view on the banking KPIs applied to compute the z-score. Please assess and comment on the development in the charts below, comparing United States and France. Which conclusions would you derive for the underlying reasoning, particularly focusing on capital? What are your recommendations to European Central Bank in respect to the upcoming macroeconomic downturn?
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