README.md

metadata

title: Signalpha Default Cascade Simulation 2026
emoji: 🏦
colorFrom: red
colorTo: purple
sdk: docker
app_port: 7860
license: mit
short_description: 'Signalpha: Default Cascade Simulation'

Default Cascade Simulation of Banks 2026

Interactive simulation modeling how commercial real estate (CRE) defaults cascade through U.S. bank balance sheets, with optional unrealized securities losses. Built for the Signalpha Substack publication.

What it does

Uses Q3 2025 FFIEC Call Report data for 147 U.S. banks (over $10 billion in assets, $20.2 trillion in combined assets) to simulate the impact of CRE losses on bank capitalization. Displays two horizontal stacked bar charts:

1. Tangible Equity Ratio — Banks categorized by Prompt Corrective Action (PCA) thresholds: Well Capitalized (>=8%), Adequately Capitalized (>=4%), Undercapitalized (>=2%), Critically Undercapitalized (>=0%), Insolvent (<0%)
2. Estimated CET1 Ratio — Banks categorized by Basel III thresholds: Well Capitalized (>=6.5%), Undercapitalized (>=4.5%), Below Basel III Minimum (>=0%), Insolvent (<0%)

Losses are calculated as: CRE Losses = CRE Total x Default Rate x LGD. When unrealized losses are toggled on, they are added to CRE losses before adjusting equity.

Controls

• CRE Default Rate (0-50%): Percentage of CRE portfolio that defaults
• Loss Given Default (0-100%): Recovery shortfall on defaulted loans
• Average RWA Ratio (50-75%): Risk-weighted assets as percentage of total assets (for CET1 calculation)
• Unrealized Losses: Toggle to include unrealized losses on investment securities

Features

• Download figure as PNG (via html2canvas)
• Download underlying data as CSV
• In-app documentation panel

Run locally

pip install -r requirements.txt
python app.py
# Open http://localhost:8050

Deploy to Hugging Face Spaces

Uses Docker SDK. See Dockerfile for build configuration.

Data source

The Banking Initiative at Florida Atlantic University, based on Dr. Rebel Cole's analysis of Bank Call Report data for Q3 2025 from the U.S. Federal Financial Institutions Examination Council.