Coarsely grate the potatoes into a large bowl of iced water. Leave to stand for 10 minutes.
Meanwhile, heat 1 tablespoon of the oil in a large frying pan and fry the bacon over a moderate heat for 5 minutes, or until crisp. Remove with a slotted spoon and set aside.
Add the onion and capsicum to the pan and cook for 5 minutes until soft. Slide onto the same plate as the bacon.
Drain the potatoes, then use your hands to squeeze out as much water as possible. Pat dry with a clean tea towel. Combine the potatoes, bacon, onion, capsicum and paprika in a large bowl and season with salt and pepper.
Add half the remaining oil to the pan and heat. Spread the potato mixture evenly in the pan and cook, without stirring, for 15 minutes until golden brown and crispy on the bottom.
Put a large plate over the pan and invert the pan. Heat the remaining oil in the pan, slide the potatoes back into the pan, raw-side down, and cook for a further 10 minutes until golden and crispy. Garnish with parsley. Serve hot, cut into wedges.