Optimization of Post-Scoring Classification and Impact on Regulatory Capital for Low Default Portfolios

Benoit Genest and Ziad Fares

MPRA Paper from University Library of Munich, Germany

Abstract: After the crisis of 2008, new regulatory requirements have emerged with supervisors strengthening their position in terms of requirements to meet IRBA standards. Low Default Portfolios (LDP) present specific characteristics that raise challenges for banks when building and implementing credit risk models. In this context, where banks are looking to improve their Return On Equity and supervisors strengthening their positions, this paper aims to provide clues for optimizing Post-Scoring classification as well as analyzing the relationship between the number of classes in a rating scale and the impact on regulatory capital for LDPs.

Keywords: Basel II; Return On Equity; RWA; Classification trees; Rating scale; Gini; LDP (search for similar items in EconPapers)
JEL-codes: C4 C5 G21 (search for similar items in EconPapers)
Date: 2014-04-27
New Economics Papers: this item is included in nep-rmg
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