Regulatory capital for credit risk: Is there a loophole in the system?

Abhishek Teji
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Abhishek Teji: Universidad de Barcelona, Barcelona – España

Revista de Economía y Finanzas (REyF), 2023, vol. 1, issue 2, 135-148

Abstract: Given the Spanish housing and mortgage market, there is an important incentive for young property buyers to exceed the debt-to-income (DTI) ratio, using a loophole in the database, CIRBE. The objective of this paper is to analyse whether there could be a possibility of a loophole in the system and therefore how it could affect the calculation of regulatory capital for credit risk requirements. The main hypothesis is that if this practice is commonly used by the borrowers, then there could be a significant difference between the VaR calculated by the banks and the actual VaR needed to cover the regulatory capital.

Keywords: CIRBE; Value-at-risk; Loophole; Credit risk; Regulatory capital (search for similar items in EconPapers)
JEL-codes: C63 G20 G21 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cud:journ2:v:1:y:2023:i:2:p:135-148

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