Cross-border loan portfolio diversification, capital requirements, and the European Banking Union

Bericht

We provide preliminary evidence of potential risk reduction benefits from banks’ loan portfolio diversification cross-border within the Euro area. Using aggregate data on banking sector cor-porate loan losses for each Euro area member-state, our estimates suggest that the static diversification benefit could be substantial. The minimum capital needed to withstand the max-imum annual loss from a hypothetical fully diversified Euro area bank loan portfolio over the period 2001-2017 would have been only 40 % of the total capital needed to withstand the maximum losses on a country by country basis. We also calibrate the country-specific loan loss distributions and the Euro area portfolio’s loss distribution to the Vasicek (2002) model, which underlies the Basel framework’s Internal Ratings Based Approach. We find that the im-plied asset correlation parameter of a median country portfolio is about twice as large as that of the fully diversified Euro area portfolio.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: BoF Economics Review ; No. 3/2019

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: pankit ; luotot ; euroalue

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Jokivuolle, Esa ; Virén, Matti
• Ereignis: Veröffentlichung
• (wer): Bank of Finland
• (wo): Helsinki
• (wann): 2019

Weitere Informationen

• Handle: http://hdl.handle.net/10419/212996
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ