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Bank Credit Risk

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  • E P Davis

Abstract

The paper evaluates the contribution industrial-sector data on loan losses could make to diversifying and pricing bank risk. It derives the mean, variance and cyclical sensitivity of sectoral provisions and write offs, then assesses implications for loan pricing; standards of capital adequacy; risk borne by sectorally-concentrated banks; and bank risk over time. Complementary econometric estimates for aggregate losses highlight the role of corporate gearing and rapid balance sheet growth. It is suggested all banks should collect and employ sectoral loss data, and the analysis could be borne in mind for any future renegotiation of the Basle Accord.

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File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1993/wp08.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 8.

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Date of creation: Apr 1993
Date of revision:
Handle: RePEc:boe:boeewp:8

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References

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  1. Guttentag, Jack & Herring, Richard, 1984. " Credit Rationing and Financial Disorder," Journal of Finance, American Finance Association, vol. 39(5), pages 1359-82, December.
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Cited by:
  1. Jesús Saurina-Salas, 1998. "Determinantes de la morosidad de las cajas de ahorro españolas," Investigaciones Economicas, Fundación SEPI, vol. 22(3), pages 393-426, September.
  2. Darren Pain, 2003. "The provisioning experience of the major UK banks: a small panel investigation," Bank of England working papers 177, Bank of England.
  3. E Philip Davis & Haibin Zhu, 2004. "Commercial property prices and bank performance," Economics and Finance Discussion Papers 04-19, Economics and Finance Section, School of Social Sciences, Brunel University.
  4. Davis, E. Philip & Zhu, Haibin, 2011. "Bank lending and commercial property cycles: Some cross-country evidence," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 1-21, February.
  5. Santiago Fernández de Lis & Jorge Martínez Pagés & Jesús Saurina, 2000. "Credit Growth, Problem Loans and Credit Risk Provisioning in Spain," Banco de Espa�a Working Papers 0018, Banco de Espa�a.
  6. Vicente Salas & Jesús Saurina, 2002. "Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks," Journal of Financial Services Research, Springer, vol. 22(3), pages 203-224, December.
  7. John Whitley & Richard Windram, 2003. "A quantitative framework for commercial property and its relationship to the analysis of the financial stability of the corporate sector," Bank of England working papers 207, Bank of England.

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