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Stress Testing the Enterprise Sector's Bank Debt: A Micro Approach

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Author Info
Eivind Bernhardsen (Financial Supervisory Authority of Norway)
Bjorne Dyre Syversten (Norges Bank)
Abstract

This paper describes Norges Bank’s micro stress-testing framework for assessing the Norwegian banking sector’s losses on loans to the nonfinancial enterprise sector. Using projected macro variables and a stock-flow approach, annual financial statements of every firm in Norway are projected five years ahead. The loan loss potential is then assessed using a creditscoring model. We present a backtest of projections, taking the history of macro variables as given. Our results are fairly good using a relatively simple setup, and we conclude that stockflow projections of financial statements can be useful for stress testing banks’ loan portfolios.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 5 (2009)
Issue (Month): 3 (September)
Pages: 111-138
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Handle: RePEc:ijc:ijcjou:y:2009:q:3:a:4

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
M49 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Other

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lewbel, Arthur, 2000. "Identification Of The Binary Choice Model With Misclassification," Econometric Theory, Cambridge University Press, vol. 16(04), pages 603-609, August. [Downloadable!]
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  2. Hausman, J. A. & Abrevaya, Jason & Scott-Morton, F. M., 1998. "Misclassification of the dependent variable in a discrete-response setting," Journal of Econometrics, Elsevier, vol. 87(2), pages 239-269, September. [Downloadable!] (restricted)
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This page was last updated on 2009-12-1.

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