Cross-border loan portfolio diversification, capital requirements, and the European Banking Union
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dc.contributor |
Bank of Finland |
dc.contributor |
Suomen Pankki |
dc.contributor.author |
Jokivuolle, Esa |
dc.contributor.author |
Virén, Matti |
dc.date.accessioned |
2019-05-29T09:27:45Z |
dc.date.available |
2019-05-29T09:27:45Z |
dc.date.issued |
2019 |
dc.identifier.uri |
https://helda.helsinki.fi/bof/handle/123456789/16151 |
dc.description.abstract |
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. |
dc.format.extent |
11 |
dc.language.iso |
ENG |
dc.rights |
https://helda.helsinki.fi/bof/copyright |
dc.title |
Cross-border loan portfolio diversification, capital requirements, and the European Banking Union |
dc.type |
Paper |
dc.identifier.urn |
URN:NBN:fi:bof-201905281211 |
dc.series.name |
BoF Economics Review |
dc.series.year |
2019 |
dc.series.number |
3/2019 |
dc.series.sortingnumber |
0003 |
dc.date.publication |
28.5.2019 |
dc.subject.yso |
pankit
|
dc.subject.yso |
luotot
|
dc.subject.yso |
euroalue
|
bof-internal.includedInCRIS |
1 |
dc.type.okm |
D4 |
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