Credit risk model for the Estonian banking sector
AbstractThis paper gives an overview of the credit risk model that has been developed for the Estonian banking system. The non-performing loans and loan loss provisions of the four largest banks and the rest of the banking sector have been modelled conditional on the underlying economic conditions: economic growth, unemployment, interest rates, in- flation, indebtedness and credit growth. The model highlights the importance of economic growth as the most influential factor behind the soundness of the banking sector in the latest downturn. The expected fall in output volatility will probably decrease the relative importance of output growth and increase the role of interest rates in the future.
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Bibliographic InfoPaper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number wp2010-01.
Date of creation: 04 Feb 2010
Date of revision: 04 Feb 2010
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-FDG-2010-03-28 (Financial Development & Growth)
- NEP-MAC-2010-03-28 (Macroeconomics)
- NEP-RMG-2010-03-28 (Risk Management)
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