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Estimation of Regulatory Credit Risk Models

Listed author(s):
  • 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 España & Working Papers Homepage in its series Working Papers with number 1305.

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    Length: 42 pages
    Date of creation: Mar 2013
    Handle: RePEc:bde:wpaper:1305
    Contact details of provider: Web page: http://www.bde.es/

    Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/docs/
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    1. Rodriguez, Adolfo & Trucharte, Carlos, 2007. "Loss coverage and stress testing mortgage portfolios: A non-parametric approach," Journal of Financial Stability, Elsevier, vol. 3(4), pages 342-367, December.
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    3. Darrell DUFFIE & Andreas ECKNER & Guillaume HOREL & Leandro SAITA, "undated". "Frailty Correlated Default," Swiss Finance Institute Research Paper Series 08-44, Swiss Finance Institute.
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    7. Jiménez, Gabriel & Mencía, Javier, 2009. "Modelling the distribution of credit losses with observable and latent factors," Journal of Empirical Finance, Elsevier, vol. 16(2), pages 235-253, March.
    8. Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
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    10. Matutes, Carmen & Vives, Xavier, 2000. "Imperfect competition, risk taking, and regulation in banking," European Economic Review, Elsevier, vol. 44(1), pages 1-34, January.
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    13. 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.
    14. Repullo, Rafael, 2003. "Capital Requirements, Market Power and Risk-Taking in Banking," CEPR Discussion Papers 3721, C.E.P.R. Discussion Papers.
    15. 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.
    16. Gabriel Jiménez & Jesús Saurina, 2005. "Credit cycles, credit risk, and prudential regulation," Working Papers 0531, Banco de España;Working Papers Homepage.
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