ERM concepts and Risk categorisation [20]

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Bullet points include: Analysing ways in which Modigliani-Miller fails to apply can be fruitful E.g. Impavido et al. (2011) on impact of Basel III / Solvency II on banks’ / insurers’ cost of capital Debt interest deductibility – particularly relevant to banks given Basel III’s desire to increase capital and improve its quality Information asymmetry – Solvency II bigger change than Basel III Also does not identify to whom value accrues C.f. Too Big to Fail (TBTF), Systemically Important Financial Institutions (SIFI) and deposit protection underpins and how they impact apportionment of value between shareholders and public purse

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