Skip navigation

An assessment of Basel II procyclicality in mortgage portfolios

Thumbnail
View
488,2 kB
Authors
Issue Date
2007
Physical description
34 p.
Abstract
In this paper we develop a probability of default (PD) model for mortgage loans, taking advantage of the Spanish Credit Register, a comprehensive database on loan characteristics and credit quality. From that model, we calculate different types of PDs: point in time, PIT, through the cycle, TTC, average across the cycle and acyclical. Then, we compare capital requirements coming from the different Basel II approaches. We show that minimum regulatory capital under Basel II can be very sensitive to the risk measurement methodology employed. Thus, the procyclicality of regulatory capital requirements under Basel II is an open question, depending on the way internal rating systems are implemented and their output is utilised. We focus on the mortgage portfolio since it is one of the most under researched areas regarding the impact of Basel II and because it is one of the most important banks' portfolios
Publish on
Documentos de trabajo / Banco de España, 0712
Subjects
Appears in Collections:


loading