Econometric model to estimate the Probability of Default and Loss Given Default in the EBA stress test in 2016

Salvador Climent-Serrano (University of Valencia)

Article ID: 334



In this research, an econometric with panel data using Ordinary least squares OLS model is constructed following the guidelines recommended by the EBA stress test methodology for 2016. The findings indicate that macroeconomic factors affecting defaults are the expected ones in the Spanish credit institutions. However, loan impairments do not follow the patterns that a priori would be normal. Divergent is outcomes in defaults and impairments: the Non-Performing Loans (NPL) is pro-cyclical and impairment losses are counter-cyclical.


NPL, delinquency, impairment losses, Spanish banks, late payment, probability of default (PD), loss given default (LGD)

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