In this paper, we estimate the probability of a financial institution breaching the Common Equity Tier 1 capital under Basel III rules. We do so by applying the Merton model, where balance sheet data and market data are used to match the probability of default implied by the model with the probability of default implied by market quotations for credit default swaps. We provide an empirical analysis for several banks classified by the Financial Stability Board and the Basel Committee on Banking Supervision as Global Systemically Important Financial Institutions, evaluating how the probability of breaching the Common Equity Tier 1 Capital evolved from 2005 to 2015. We find that higher Common Equity Tier 1 Capital ratios do not necessarily imply lower probabilities of breaching capital requirements and vice versa. We also focus on the asset volatility calibrated according to our model and we find that it appears to be a good proxy for the risk-weighted asset density.

中文翻译：

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应用默顿模型来估计违反巴塞尔协议III规定的资本金要求的可能性

在本文中，我们估算了根据巴塞尔协议III规定，金融机构违反普通股一级资本的可能性。我们通过应用Merton模型来做到这一点，在该模型中，资产负债表数据和市场数据用于将模型隐含的违约概率与信用违约掉期的市场报价隐含的违约概率进行匹配。我们对被金融稳定委员会和巴塞尔银行监督委员会归类为全球系统重要性金融机构的几家银行进行了实证分析，评估了从2005年到2015年违反普通股一级资本的可能性如何演变。我们发现更高普通股一级资本比率不一定意味着较低的违反资本要求的可能性，反之亦然。