This paper assesses the effectiveness of lending restriction measures, such as loan-to-value and debt-service-to-income ratios, in affecting developments in house prices and credit. We use data on 99 lending standard restrictions implemented in 28 EU countries over 1990-2018. The results suggest...

The growth of the shadow banking system has allowed credit risk to grow outside the purview of traditional bank regulation. Despite lacking relevant information and control over shadow banks, the magnitude of the recent financial crisis required the Federal Reserve to backstop their activities....

A model-based assessment of credit risk is subject to both specification and calibration errors. Focusing on a well known credit risk model, we propose a methodology for quantifying the relative importance of alternative sources of such errors and apply this methodology to a large data set. We...

We propose a methodology for measuring the market-implied capital of banks by subtracting from the market value of equity (market capitalization) a credit spread-based correction for the value of shareholders’ default option. We show that without such a correction, the estimated impact of a...

The European banking regulation does neither specify a methodology nor a level of confidence for the purpose of quantifying the margin of conservatism for the general estimation error (MoC C) of risk parameter estimates. In order to fill this gap, Casellina et al. (2023) determine the MoC C of...