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Supervision by robust risk monitoring – a cycle-independent Hungarian corporate credit rating system

Author

Listed:
  • György Inzelt

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Gábor Szappanos

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Zsolt Armai

    (expert of FHB Nyrt.)

Abstract

International and Hungarian prudential regulation primarily tasks the supervisory authority with controlling the supervised credit institutions’ lending policy and, in relation to this, the internal models used in this policy. However, the crisis period that started in 2009 demonstrated that in many cases credit institutions with the same lending policy employ models which project significantly different capital and risk costs when rating their clients. As a result, developing monitoring tools that enable comparison of individual internal models and regular monitoring of the lending practices of the individual institutions have recently gained prominence in international supervision. This study presents a possible, simple yet stable and readily applicable corporate monitoring framework which is in line with the Hungarian and international regulation and best practices.

Suggested Citation

  • György Inzelt & Gábor Szappanos & Zsolt Armai, 2016. "Supervision by robust risk monitoring – a cycle-independent Hungarian corporate credit rating system," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 15(3), pages 51-78.
    • Handle: RePEc:mnb:finrev:v:15:y:2016:i:3:p:51-78
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    File URL: http://english.hitelintezetiszemle.hu/letoltes/gyorgy-inzelt-gabor-szappanos-zsolt-armai.pdf
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    References listed on IDEAS

    as
    1. Dirk Schoenmaker & Nicolas Véron, . "European banking supervision- the first eighteen months," Blueprints, Bruegel, number 14868, December.
    2. Péter Bauer & Marianna Endrész, 2016. "Modelling Bankruptcy Using Hungarian Firm-Level Data," MNB Occasional Papers 2016/122, Magyar Nemzeti Bank (Central Bank of Hungary).
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    Citations

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    Cited by:

    1. Gergõ Horváth, 2021. "Corporate Credit Risk Modelling in the Supervisory Stress Test of the Magyar Nemzeti Bank," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 20(1), pages 43-73.
    2. Márk Szenes & Zsófia Dabi, 2020. "Modelling Corporate Probability of Default – A Possible Supervisory Benchmark Model," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(3), pages 52-77.

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    More about this item

    Keywords

    modelling and analysis based on large databases; forecasting;

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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