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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Marta Ramos González & Antonio Partal Ureña & Pilar Gómez Fernández-Aguado, 2021. "Regulatory Estimates for Defaulted Exposures: A Case Study of Spanish Mortgages," Mathematics, MDPI, vol. 9(9), pages 1-9, April.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:9:p:997-:d:545081
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    References listed on IDEAS

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