Regulatory Estimates for Defaulted Exposures: A Case Study of Spanish Mortgages

Marta Ramos González, Antonio Partal Ureña and Pilar Gómez Fernández-Aguado
Additional contact information
Marta Ramos González: Banking Supervision Department, Bank of Spain, 28014 Madrid, Spain
Antonio Partal Ureña: Department of Financial Economics and Accounting, Faculty of Legal and Social Sciences, University of Jaén, 23071 Jaén, Spain
Pilar Gómez Fernández-Aguado: Department of Financial Economics and Accounting, Faculty of Legal and Social Sciences, University of Jaén, 23071 Jaén, Spain

Mathematics, 2021, vol. 9, issue 9, 1-9

Abstract: The capital requirements derived from the Basel Accord were issued with the purpose of deploying a transnational regulatory framework. Further regulatory developments on risk measurement is included across several documents published both by the European Banking Authority and the European Central Bank. Among others, the referred additional documentation focused on the models’ estimation and calibration for credit risk measurement purposes, especially the Advanced Internal-Ratings Based models, which may be estimated both for non-defaulted and defaulted assets. A concrete proposal of the referred defaulted exposures models, namely the Expected Loss Best Estimate (ELBE) and the Loss Given Default (LGD) in-default, is presented. The proposed methodology is eventually calibrated on the basis of data from the mortgage’s portfolios of the six largest financial institutions in Spain. The outcome allows for a comparison of the risk profile particularities attached to each of the referred portfolios. Eventually, the economic sense of the results is analyzed.

Keywords: risk management; banking regulation; Basel Acord; defaulted exposures; economic downturn; Expected Loss Best Estimate; Loss Given Default in-default (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/9/9/997/pdf (application/pdf)
https://www.mdpi.com/2227-7390/9/9/997/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:9:p:997-:d:545081

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().