Background

  • RAC stands for Risk-Adjusted Capital Ratio
  • RAC is S&P’s in-house capital metric to measure a bank’s capitalization
  • RAC is important because it is the main quantitative metric in S&P’s credit ratings
  • RAC is very complex to very compute

Data set overview

  • The data covers 142 banks in 31 European countries and contains four columns:
## # A tibble: 6 × 4
##   Bank                              Country       RAC    T1
##   <chr>                             <chr>       <dbl> <dbl>
## 1 Aargauische Kantonalbank          Switzerland  22.2  18.4
## 2 AB Svensk Exportkredit (publ)     Sweden       18.5  21.3
## 3 ABANCA Corporación Bancaria, S.A. Spain         9.7  14.4
## 4 ABN AMRO Bank N.V. (ENXTAM:ABN)   Netherlands  12.7  15.7
## 5 Aegean Baltic Bank S.A            Greece        8.5  24  
## 6 AIB Group plc (ISE:A5G)           Ireland      14    18.4

Shiny app overview

  • The regression is dynamic, ie. it adjusts with the selection of data points Link to shiny app

Example

  • Select a country, like France, and input a Tier 1 ratio, like 10.0%

Potential improvements

  • Allow to select banks from different countries but with similar economic risk