Using 11years of monthly Italian bank-by-bank data, this paper correlates the bilateral amounts and the identity of each interbank borrower and lender with a long list of explanatory variables. The results show that interbank customer relationships, i.e. stable and strong relationships between...

Basel III has introduced a non-risk-weighted leverage ratio requirement (LRR) which complements the internal ratings based (IRB) capital requirements. It provides a backstop against model risk which arises if some loans get incorrectly rated and become toxic. We study the effects of the LRR on...

An accurate forecast of the parameter loss given default (LGD) of loans plays a crucial role for risk-based decision making by banks. We theoretically analyze problems arising when forecasting LGDs of bank loans that lead to inconsistent estimates and a low predictive power. We present several...

By employing Moody’s corporate default and rating transition data spanning the last 90years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we will focus on the worst case scenario over the...

Using Moody’s Ultimate Recovery Database, we estimate a model for bank loan recoveries using variables reflecting loan and borrower characteristics, industry and macroeconomic conditions, and several recovery process variables. We find that loan characteristics are more significant...

Rajan and Zingales (2003) hypothesize that openness—trade and financial—is a crucial determinant of financial development. The main policy implication emerging from this hypothesis is that openness should be promoted as a means of facilitating economic growth through financial development....

We examine effects of government actions and related accounting policies on the corporate bond market implied by changes in relations between aggregate bond returns and cash flow and discount rate news. We capture the influence of risk by partitioning bonds into investment and speculative...