Market reaction to EBA credit risk regulation announcements

Project Identification
Project Period
1/2022 - 12/2022
Investor / Pogramme / Project type
Masaryk University
MU Faculty or unit
Faculty of Economics and Administration

Credit risk generally represents the most substantial financial risk exposure for banks. The ability to accurately estimate the probability the debt will be repaid when due is at the very core of banks' lending capabilities. In order to prevent excessive risk-taking, an extensive regulatory framework is put in place to ensure the financial sector will remain stable even under conditions of increased uncertainty.
Using the reaction of stock market participants as an approximation, the aim of the project is to examine the future impact of new EBA regulatory standards and guidelines related to credit risk modelling. We study not only the impact of each regulation but also whether market participants still consider the latter announcements related to the same change as relevant.

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