On the use of portfolio risk models and capital requirements in emerging markets : the case of Argentina

A portfolio-based model and recent Central Bank of Argentina credit bureau data are used to estimate whether current capital and provisioning regulations match actual risks. Arguing that provisions should cover expected losses and that captial requirements should cover potential losses beyond expected losses subject to some statistical level of tolerance, the article assesses how well actual capital and provisioning requirements match the estimated requirements given by the model. Actual provisioning requirements were found to be close to implied levels of expected losses. (InWEnt/DÜI)