The Determinants of Risk Weighted Assets in Europe
Angelo Leograndea b✉, Alberto Costantielloc, Lucio Lauretic d, Marco Maria Matarresec d
- aLum University Giuseppe Degennaro - Lum Enterprise s.r.l., Casamassima, Bari 70010, Italy
- bLum University Giuseppe Degennaro - Lum Enterprise s.r.l
- cLum University Giuseppe Degennaro
- dLum University Giuseppe Degennaro, Casamassima, 70010, Italy
- ✉Corresponding author
Papers open inside SciRah from the original publisher or repository; SciRah never hosts them.
Abstract
We have estimated the level of Risk Weighted Assets among 30 countries in Europe, in 30 trimesters, using data of the European Banking Authority-EBA of 139 variables. We perform an econometric model using Pooled OLS, Panel Data with Fixed Effects, Panel Data with Random Effects, Weighted Least Squares. We found that Risk Weighted Assets is negatively associated, among others, to the level of NFC loans in mining and quarrying, in public administration and defence, and in financial and insurance activities and positively associated, among others to distribution of NFC loans in human health services and social work activities, in education and the level of net fee and commission income. Furthermore, we apply a cluster analysis with the k-Means algorithm, and we find the presence of two clusters. A comparison was then made between eight different machine learning algorithms for predicting the value of the RWAs and we found that the best predictor is the linear regression. The RWA value is predicted to increase by 1.5%.