Credit portfolio modelling and its effect on capital requirements
[this paper was presented at the joint fall conference 'Basel III and beyond, held by the Deutsche Bundesbank and the Centre for European Economic Research (ZEW) in Eltville from 19 to 20 October 2011]
Buch in deiner Nähe kaufen
Beschreibung
The subprime crisis revealed that the adoption of suitable systems for the management of credit risk is of utmost concern. The Basel Committee on Banking Supervision (2009) advises banks to use credit portfolio models with caution when assessing the capital adequacy. This paper investigates whether decisions on total risk-based capital ratios are channeled through credit portfolio models. In other words, do credit portfolio models serve as a relevant determinant for banks to adjust their capital allocation? To empirically test the relationship we measure the average treatment effect by conducting a quasi-natural experiment in which we employ a propensity-matching approach to panel data. We find that the adoption of credit portfolio models positively and significantly affects regulatory capital decisions of banks both directly following the introduction as well as over a longer time horizon. By now it is commonly accepted that overreliance on credit portfolio models composes a fundamental cause of the current financial crisis. Our results put the debate about overreliance on quantitative models in a new perspective. This knowledge may prove valuable for regulators who aim to understand bank behaviour and thus advance regulation.
Steht auch als Elektronisches Dokument zur Verfügung (ISBN 978-3-86558-811-1)
Autor*in
Dilek Bülbül
Themen in »Credit portfolio modelling and its effect on capital requirements«
Eigenkapitalvorschriften Kreditportfoliomodell Risikomanagement