Retail Loans & Basel II: Using Portfolio Segmentation to Reduce Capital Requirements

Released on by Daniel Kaltofen
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  • Retail Loans & Basel II: Using Portfolio Segmentation to Reduce Capital Requirements Book Detail

  • Author : Daniel Kaltofen
  • Release Date : 2016
  • Publisher : CEPS
  • Genre :
  • Pages : 36
  • ISBN 13 : 929079660X
  • File Size : 24,24 MB
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Retail Loans & Basel II: Using Portfolio Segmentation to Reduce Capital Requirements by Daniel Kaltofen PDF Summary

Book Description: This paper presents a new technique for grouping retail loans into homogenous risk pools, which adheres to the provisions of Basel II. We use recursive partitioning and test it on a data set of approximately 413,000 auto loans. By classifying loans according to selective predictors of default, we find that banks can achieve significant savings in terms of a lower regulatory capital requirement. Alternatively, this provides the opportunity to increase lending capacity.

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