Bundesbank paper analyses drivers of default risk

Systematic factors have a "significant impact" on the default risk of the credit portfolios of German banks, according to a discussion paper published by the Deutsche Bundesbank on December 31.

The authors, Christoph Memmel, Yalin Gündüz and Peter Raupach, explain the stronger the influence systematic factors have on default risk, the greater portfolio losses fluctuate over time. As these fluctuations must be absorbed by the bank's capital, the authors say, it is crucial for regulators to unders