What We Know, Don't Know and Can't Know About Bank Risks: A View from the Trenches

This paper seeks to put forward a framework, from the perspective of practitioners and policymakers, for how the known, unknown, and unknowable vary by risk type within banking. We define total bank risk in terms of earnings volatility, which can be broken down into five major classes of risk: market, credit, asset/liability, operational, and business risks. For our purposes, risk is known (K) if it can be enumerated, in the sense of being...