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Title: Risk profile indicators and Spanish banks’ probability of default from a regulatory approach
Authors: Gómez Fernández-Aguado, P.
Parrado Martínez, P.
Partal Ureña, A.
Abstract: This paper analyses the relationships between the traditional bank risk profile indicators and a new measure of banks’ probability of default that considers the Basel regulatory framework. First, based on the SYstemic Model of Bank Originated Losses (SYMBOL), we calculated the individual probabilities of default (PD) of a representative sample of Spanish credit institutions during the period of 2008–2016. Then, panel data regressions were estimated to explore the influence of the risk indicators on the PD. Our findings on the Spanish banking system could be important to regulatory and supervisory authorities. First, the PD based on the SYMBOL model could be used to analyse bank risk from a regulatory approach. Second, the results might be useful for designing new regulations focused on the key factors that affect the banks’ probability of default. Third, our findings reveal that the emphasis on regulation and supervision should differ by type of entity.
Keywords: probability of default; bank risk; banking regulation; SYMBOL; financial stability
Issue Date: 2018
Publisher: MPDI
Appears in Collections:DEFC-Artículos

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