Suchergebnisse

In the last decade, stress tests have become indispensable in bank risk management which has led to significantly increased requirements for stress tests for banks and regulators. Although the complexity of stress testing frameworks has been enhanced considerably over the course of the last few years, the majority of credit risk models (e.g. Merton (1974), CreditMetrics, KMV) still rely on Gaussian copulas. This paper complements the finance literature providing new insights into the impact of different copulas in stress test applications using supervisory data of 17 large German banks. Our findings imply that the use of a Gaussian copula in credit risk stress testing should not by default be dismissed in favor of a heavy-tailed copula which is widely recommended in the finance literature. Gaussian copula would be the appropriate choice for estimating high stress effects under extreme scenarios. Heavy-tailed copulas like the Clayton or the t copula are recommended in the case of less severe scenarios. Furthermore, the paper provides clear advice for designing a credit risk stress test.

Using a unique and comprehensive data set on the two largest economies of the Eurozone - France and Germany - this paper first proceeds to a computation of the Gordy formula relaxing the ad hoc sizedependent constraints of the Basel formulas. Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis of the consistency of own funds requirements with the riskiness of SME. In both the French and the German sample, results suggest that the relative differences between the capital requirements for large corporates and those for SME (in other words the capital relief for SME) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRD IV is able to compensate the difference between estimated and CRR/CRD IV capital requirements for loans in the corporate portfolio. However, no empirical evidence is found supporting the € 1.5 mln SME threshold currently included in Article 501 (CRR).