Behne, Markus Wilhelm; Haselmann, Rainer; Vig, Vikrant - 2014
In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of … financial institutions. Model-based regulation was meant to enhance the stability of the financial sector by making capital … underpredict actual default rates by 0.5 to 1 percentage points; (2) both default rates and loss rates are higher for loans that …