4
$\begingroup$

In Basel/CRR (capital requirement regulation) there are various approaches for the estimation of capital requirements.

For corporate exposures there is the Foundations IRB approach (F-IRBA, own estimates of PD) and the Advanced IRBA (A-IRBA) with own estimates of loss-given-default and conversion factors. For the exposures to specialised lending (e.g. project finance) a so called slotting approach exists in addition.

These approaches have increasing demands for model sophistication and especially data availability. The approaches used for capital calculations are reported in the disclosure reports for each bank.

my question: are such numbers available in an aggregate basis somewhere?

I would be interested in questions like "What is the share of Corporate exposure in F-IRBA at European banks as opposed to Standardized Approach and A-IRBA?".

Is such data collected and made available somewhere?

PS: I am aware that such questions are not 100% on-topic for a quant site but I made the experience that quants should know how the peer group looks.

Improve this question
$\endgroup$
2
  • 1
    $\begingroup$ In total, 102 institutions from 22 Member States participated in the IRB survey. I wonder if Table 13 answers your question eba.europa.eu/documents/10180/1720738/… $\endgroup$
    – AK88
    Commented Jul 4, 2019 at 18:55
  • $\begingroup$ @AK88 thank you for pointing me to this table. What I wonder is whether the data quality is good (this is questioned in the survey be the authors too). IT says that the majority of SPL is in AIRBA (75% in terms of number, 98% in terms of exposure). This does not reflect my experience ... do you trust these numbers? $\endgroup$
    – Richi Wa
    Commented Jul 5, 2019 at 6:54

1 Answer 1

Reset to default
3
+50
$\begingroup$

The EBA performs the HDP (high default portfolio) and LDP (low default portfolio) benchmarking exercises, which would be relevant. You can find it on their website. Here are a couple of examples:

https://eba.europa.eu/documents/10180/2087449/EBA+Report+results+from+the+2018+Credit+Risk+Benchmarking+Report.pdf

https://eba.europa.eu/documents/10180/15947/EBA+Report+results+from+the+2016+high+default+portfolio+exercise+-+March+2017.pdf

Re-comment, I think it is clearer in the summary table in the latest survey which includes both HDP and LDP (https://eba.europa.eu/documents/10180/2087449/EBA+Report+results+from+the+2018+Credit+Risk+Benchmarking+Report.pdf):

enter image description here

The intro says 117 institutions have permission for credit models, of which 114 submitted the data, so I think the sample is representative and they have even explained why the 3 did not. The reason the number of institutions differ by asset class is because not all of them would have exposure to all classes/samples. And the rows don’t add up to the total institutions could be because of footnote 41, same institution using different approaches in different countries. The report also claims the results are stable compared to previous survey, implying quality is ok I suppose.

Improve this answer
$\endgroup$
6
  • $\begingroup$ Thank you for pointing me to these surveys. How do you interpret the numbers? In the 2018 survey (high and low default) I see a 50%:50% AIRB:FIRBA share for Large Corporates in the 91 institutions sample (more in AIRB). In the 2016 (high default only) a similar picture. Do you think the samples are biased? They have a quality check. Maybe these numbers are more plausible than in the source provided in the comment above (EBA Report on IRB modelling practices 2017) the numbers are much different (higher shares of AIRB close to 100%) $\endgroup$
    – Richi Wa
    Commented Jul 5, 2019 at 7:12
  • $\begingroup$ Have added further details in the answer. $\endgroup$
    – Magic is in the chain
    Commented Jul 6, 2019 at 15:49
  • $\begingroup$ Thank you for adding the table. This is of course what I looked at when I browsed the report. What they say on page 5 is "highest level of consolidation" and 117 bank across 17 EU countries. Does that mean that this overview is comprehensive for all EU banks in IRB? Thus this would answer my question as "among all IRB-banks in the EU (large) corporates are treated in AIRB by 50%+ of submitting institutions" ... counted on highest level of consolidation. $\endgroup$
    – Richi Wa
    Commented Jul 8, 2019 at 7:06
  • $\begingroup$ This is surprising to me for tow reasons: AIRB (for corporates) is very data demanding and I wonder whether really 50% of the institutions got approval. Furthermore it states only 6 institutions in the slotting approach for Specialised Lending. And I know 3 institutions (on highest level of cons.) by heart that apply the slotting approach. Then there would be only 3 more left in the whole EU (among IRB-banks) ... surprising. $\endgroup$
    – Richi Wa
    Commented Jul 8, 2019 at 7:09
  • 1
    $\begingroup$ Sorry Richard I won’t be able to comment on the accuracy of the underlying data, but I don’t find the AIRB proportion too high, banks did get AIRB permission in the beginning when they probably should not have considering the data challenges in modelling say LGD $\endgroup$
    – Magic is in the chain
    Commented Jul 8, 2019 at 7:25

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.