Factors influencing the European bank’s probability of default: An application of SYMBOL methodology

Purificación Parrado-Martínez, Pilar Gómez-Fernández-Aguado and Antonio Partal-Ureña

Journal of International Financial Markets, Institutions and Money, 2019, vol. 61, issue C, 223-240

Abstract: This paper analyses European banks’ probability of default (PD) by estimating a new measure that is based on the SYstemic Model of Bank Originated Losses (SYMBOL). First, we calculate the individual PD of a sample of European credit institutions during the period of 2011–2016. Then, dynamic panel data models are estimated to analyse the influence of several bank-specific and macroeconomic variables on the PD. We conclude that capital adequacy, liquidity, asset quality and profitability indicators influence the European banks’ PD. The macroeconomic scenario, the industry concentration and the size of banks also appear to have an impact on their risk.

Keywords: Probability of default; Basel regulatory framework; CAMEL indicators; SYMBOL; Financial stability (search for similar items in EconPapers)
JEL-codes: C15 C23 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:61:y:2019:i:c:p:223-240

DOI: 10.1016/j.intfin.2019.04.003

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