| --- |
| 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 |
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| 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](https://signalpha.substack.com) Substack publication. |
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| ## What it does |
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| 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: |
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| 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%) |
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| 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. |
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| ## Controls |
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| - **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 |
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| ## Features |
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| - Download figure as PNG (via html2canvas) |
| - Download underlying data as CSV |
| - In-app documentation panel |
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| ## Run locally |
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| ```bash |
| pip install -r requirements.txt |
| python app.py |
| # Open http://localhost:8050 |
| ``` |
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| ## Deploy to Hugging Face Spaces |
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| Uses Docker SDK. See `Dockerfile` for build configuration. |
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| ## Data source |
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| [The Banking Initiative at Florida Atlantic University](https://business.fau.edu/departments/finance/banking-initiative/), based on Dr. Rebel Cole's analysis of Bank Call Report data for Q3 2025 from the U.S. Federal Financial Institutions Examination Council. |
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