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Estimation of Regulatory Credit Risk Models

  • Carlos Pérez Montes

    (Banco de España)

Registered author(s):

    This article estimates a general credit risk model with both macroeconomic and latent credit factors for Spanish banks during the period 2004-2010. The proposed framework allows to estimate with bank level data both the standard credit risk model of Basel II and generalized models. I fi nd evidence of persistence in the credit latent factor and of a signifi cant effect of GDP growth and interbank rates on loan default rates. The estimated default correlation is low across specifications. The model is also used to calculate the impact on the probabilities of default of stressed economic scenarios.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/13/Fich/dt1305e.pdf
    File Function: First version, March 2013
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    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1305.

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    Length: 42 pages
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:bde:wpaper:1305
    Contact details of provider: Web page: http://www.bde.es/
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    1. Catherine Doz & Domenico Giannone & Lucrezia Reichlin, 2008. "A Quasi Maximum Likelihood Approach for Large Approximate Dynamic Factor Models," Working Papers ECARES 2008_034, ULB -- Universite Libre de Bruxelles.
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    8. Repullo, Rafael, 2003. "Capital Requirements, Market Power and Risk-Taking in Banking," CEPR Discussion Papers 3721, C.E.P.R. Discussion Papers.
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    11. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
    12. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    16. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
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