Top-down Stress Tests as a Macro-Prudential Tool: Methodology and Practical Application

Artículo de revist

Presentation of the book The countercyclical provisions of the Banco de España, 2000-2016

Artículo de revistaThe first Conference on Financial Stability, jointly organized by the Banco de España and the Centro de Estudios Monetarios y Financieros (CEMFI), was held on 24 and 25 May 2017. The Conference included a panel based on the book “The Countercyclical Provisions of the Banco de España (2000-2016)” devoted to explain the experience at the Banco de España with countercyclical provisions. The Banco de España was a pioneer in developing macroprudential tools by introducing these provisions as early as in 2000. Although not able to counter the strong credit growth in the boom years, they proved effective in smoothing the loan contraction in the first years of the credit downturn and economic recession in Spain. Furthermore, the Spanish provisions were a source of inspiration for the countercyclical capital buffer agreed by the Basel Committee on Banking Supervision in 2010 and can also be considered, with some nuances along the way, the precursor of the expected-loss concept to calculate credit provisions under the IFRS 9. This article summarizes the presentation of the book in the Panel. Sitting on it were Javier Suárez as chair, Jesús Saurina Salas and Carlos Trucharte Artigas, the authors explaining the Banco de España’s countercyclical instrument and the discussants Pedro Duarte Neves and Richard Herring

Spanish dynamic provisions: main numerical features

Artículo de revistaThis article contains a detailed numerical analysis of the Spanish dynamic provision, both at the whole system level and at the level of different groups of banks. In general terms, the maximum amount of general or dynamic provisions accumulated at the peak of the lending cycle was almost €26 billion. In relative terms, a coverage of 1.1% of the credit portfolio and of almost 1% of total assets was achieved at that peak. Currently, general provisions are almost depleted to prove that they were designed as an automatic mechanism to be used as a macro-prudential countercyclical tool. In terms of risk weighted assets, dynamic provisions reached 1.5% of credit risk weighted assets at the peak of the cycle which is around half way from the maximum countercyclical capital buffer designed for Basel III. The fact that MoU group 1 and group 2 banks had accumulated at its peak €7,000 million euro of general or dynamic provisions has reduced in an equivalent amount the public capital injections required by these banks. The amount saved in this counterfactual exercise is close to 1% of the Spanish GDP

Mitigating the pro-cyclicality of Basel II

Policy discussions on the recent financial crisis feature widespread calls to address the pro-cyclicaleffects of regulation. The main concern is that the new risk-sensitive bank capital regulation (Basel II) may amplify business cycle fluctuations. This paper compares the leading alternative procedures that have been proposed to mitigate this problem. We estimate a model of the probabilities of default (PDs) of Spanish firms during the period 1987 2008, and use the estimated PDs to compute the corresponding series of Basel II capital requirements per unit of loans. These requirements move significantly along the business cycle, ranging from 7.6% (in 2006) to 11.9% (in 1993). The comparison of the different procedures is based on the criterion of minimizing the root mean square deviations of each adjusted series with respect to the Hodrick-Prescott trend of the original series. The results show that the best procedures are either to smooth the input of the Basel II formula by using through the cycle PDs or to smooth the output with a multiplier based on GDP growth. Our discussion concludes that the latter is better in terms of simplicity, transparency, and consistency with banks’ risk pricing and risk management systems. For the portfolio of Spanish commercial and industrial loans and a 45% loss given default (LGD), the multiplier would amount to a 6.5% surcharge for each standard deviation in GDP growth. The surcharge would be significantly higher with cyclically-varying LGD

Modelos factoriales de riesgo de crédito : el modelo de Basilea II y sus implicaciones

Artículo de revistaEl objetivo de este artículo es exponer las bases teóricas sobre las que se asienta el modelo propuesto por el Comité de Supervisión Bancaria de Basilea (CSBB) para determinar los requerimientos mínimos de capital exigidos a las entidades de crédito en la reciente propuesta de reforma del Acuerdo de Capital (Basilea II). Igualmente, se pretende explicar los coeficientes que aparecen en las ecuaciones que asignan las ponderaciones de riesgo (risk weights) a las diferentes categorías en las que, por sus características, quedan clasificados los distintos acreditados que componen una determinada cartera de crédito

Support measures in the banking sector: loan moratoria

This article presents a detailed analysis of the loan moratoria. The first part of the article describes the characteristics of the five types of moratoria and how the numbers of applications made and moratoria granted have evolved to date. It then outlines the status of the existing moratoria and the classification of loans whose moratoria have expired. In the second part of the article, an econometric analysis is performed to determine the impact of borrower and bank characteristics on the probability of loans being subject to moratoria, on the type and duration of the moratoria and on the classification of loans when the moratoria have expired. The results suggest that vulnerable households, those in regions most affected by the pandemic and lower income households are generally subject to legislative moratoria for longer or are more likely to transfer to non-legislative moratoria when the former expire. They also suggest that, when the moratoria expire, these households’ loans are more likely to be classified as Stage 2 (a significant increase in credit risk) or non-performing

Un sistema de clasificación (rating) de acreditados

Artículo de revistaEn función de la posibilidad que, para las entidades de crédito individuales, establece la actual propuesta de reforma del Acuerdo de Capital de 1988 (Basilea II) a la hora de calcular sus requerimientos mínimos de capital a partir de sus procedimientos internos de medición y gestión de riesgo, el objetivo de este artículo es aproximarse a dichos procedimientos obteniendo un sistema de clasificación ( rating ) de acreditados (empresas) que sirva como herramienta de apoyo alternativa a la nueva función supervisora que se deriva de la reforma propuesta en Basilea. Utilizando información de impagos y económica/financiera de los distintos acreditados, se estima un modelo de regresión logístico, de forma que, a partir de las puntuaciones que se obtienen del mismo, se establece una clasificación que, finalmente, permite obtener las categorías (homogéneas) en las que quedan clasificados los diferentes acreditados, así como las probabilidades de impago asignadas a las mismas. El trabajo incluye, además, las posibles aplicaciones que, desde un punto de vista de la autoridad supervisora, posee un sistema de rating

Los ejercicios de estrés test: experiencia reciente y reflexiones sobre su futuro

Artículo de revist

Las provisiones contracíclicas del Banco de España, 2000-2016

Incluye bibliografí

Las pequeñas y medianas empresas en el sistema crediticio español y su tratamiento según Basilea II

Artículo de revistaEl objetivo de este trabajo es evaluar el tratamiento que, en terminos de capital requerido, recibe la financiacion bancaria a las pequeñas y medianas empresas españolas en la actual propuesta de reforma del Acuerdo de Capital de Basilea. Los autores analizan los incentivos para que las entidades se decidan a adoptar el enfoque avanzado que propugana Basilea II para el calculo de los requerimientos minimos, frente a la alternativa de utilizar el enfoque standard, en principio, el sustituto por defecto del sistema actual