Econometric model to estimate the Probability of Default and Loss Given Default in the EBA stress test in 2016

Authors

  • Salvador Climent-Serrano University of Valencia

DOI:

https://doi.org/10.30564/jesr.v1i1.334

Abstract

In this research, an econometric with panel data using Ordinary least squares OLS model is constructed following the guidelines recommended by the EBA stress test methodology for 2016. The findings indicate that macroeconomic factors affecting defaults are the expected ones in the Spanish credit institutions. However, loan impairments do not follow the patterns that a priori would be normal. Divergent is outcomes in defaults and impairments: the Non-Performing Loans (NPL) is pro-cyclical and impairment losses are counter-cyclical.

Keywords:

NPL; delinquency; impairment losses; Spanish banks; late payment; probability of default (PD); loss given default (LGD)

References

[1] Climent-Serrano, S. (2016a) Stress test based on Oliver Wyman in Bank of Spain: an evaluation. Banks and Bank Systems, 11 (3), 64-72

[2] Sahin, C., & de Haan, J. (2016). Market reactions to the ECB’s Comprehensive Assessment. Economics Letters, 140, 1-5. http://dx.doi.org/10.2139/ssrn.2572985

[3] Quijano, M. (2014). Information asymmetry in US banks and the 2009 bank stress test. Economics Letters, 123(2), 203-205. http://dx.doi.org/10.1016/j.econlet.2014.02.014

[4] EBA (2016) EBA publishes 2016 EU-wide stress test results. http://www.eba.europa.eu/-/eba-publishes-2016-eu-wide-stress-test-results

[5] EBA (2016).2016 EU‐Wide Stress Test – Methodological Note. http://www.eba.europa.eu/documents/10180/1259315/2016+EU-wide+stress+test-Methodological+note.pdf

[6] Bertsatos, G., & Sakellaris, P. (2016). A dynamic model of bank valuation. Economics Letters, 145, 15-18. http://dx.doi.org/10.1016/j.econlet.2016.05.014

[7] EBA 82016) Adverse macro-financial scenario for the EBA 2016 EU-wide bank stress testing exercise. http://www.eba.europa.eu/documents/10180/1383302/2016+EU-wide+stress+test-Adverse+macro-financial+scenario.pdf

[8] Climent Serrano, S., (2016B) Dotaciones para los deterioros de los créditos. Un estudio por ciclos económicos. Cuadernos de Economía (2016b), http://dx.doi.org/10.1016/j.cesjef.2016.01.001

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Issue

Vol. 1 , Iss. 1 (October 2018)

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Articles

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