THE SOLVENCY OF THE EUROPEAN BANKING SYSTEM: A PANEL ANALYSIS OF THE PROBABILITY DEFAULT IN THE BASEL II FRAMEWORK

The study of the Probability Default represents one of the most important and interesting argument of the Risk Management, due the capability of this indicator to show in a clear way the grade of riskiness of a subject and, then, of its financial instruments. In particular, the role of the PD applied to the banking system has been at the centre of the international regulation in order to reduce the possibility of financial crises, and the relevance of this indicator has been subject of studies for the researchers in the last decade. The main target of this work is to check the robustness of the European banking system analysing the relationship between the PD, evaluated following the formula of the Basel II regulation, the balance sheet indicators of the banks and the unobservable effects of the macroeconomic scenario and the interbank market. The purpose of this kind of analysis are two: validate the suitability of the main international regulation in countering the default risk of the financial system, and try to find the drivers that leads influence the level of solvency of a bank. In order to achieve these results, it was decided to conduct an econometric analysis with panel study based on the Logit model and on the Mixed Effects models. The thesis structure provide in the first place an introductory part about the regulation of the Basel Committee and its evolution through time, the instruments and the methods used to recognise the financial risks and the solution proposed to limit them. Subsequently the exposure focuses on the theory and the literature about the PD, in order to show the status of the research. The central part of the work, instead, is dedicated to the econometric models adopted in the analysis, the motivation that have led to choose them, and the presentation of the dataset used. Finally, the last part of the thesis includes all the empirical results of the regressions and test conducted, and the conclusions about the outcomes obtained.

Lo studio della Probability Default rappresenta uno dei maggiori punti d'interesse del Risk Management. In particolare la PD applicata al sistema bancario è al centro della principale regolamentazione internazionale, il protocollo di Basilea.Lo scopo di questa tesi consiste nel analizzare la PD, calcolata tramite la formula di Basilea, attraverso degli indicatori di bilancio e la presenza di variabili latenti rappresentanti lo scenario macroeconomico e il mercato interbancario. Allo scopo di tali analisi si è deciso di utilizzare dei modelli econometrici di tipo panel basati sul logit e sui Mixed Effects models, in modo da poter sia testare la robustezza della regolamentazione che individuare i principali driver di rischio.