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The common drivers of default risk

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  • Memmel, Christoph
  • Gündüz, Yalin
  • Raupach, Peter

Abstract

Using a unique data set on German banks' loans to the German real economy, we investigate banks' credit risk. This data set includes the volume of loans per bank and industry as well as the corresponding write-downs. Our empirical study for the period 2003-2011 yields the following results: (i) Beyond the nationwide credit loss rate, industry composition, and regional factors, the loans' maturity structure is found to drive the bank-wide loss rates in the credit portfolio. (ii) The nationwide loss rate has the most impact, followed by the maturity structure and the industry composition. (iii) For nationwide banks, these common factors explain about 26% of the time variation in the loss rate of credit portfolios; for regional banks, this percentage is less than eight percent. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 36/2012.

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Date of creation: 2012
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Handle: RePEc:zbw:bubdps:362012

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Keywords: credit risk; systematic risk; maturity; stress tests;

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  1. Gabriel Jiménez & José A. López & Jesús Saurina, 2008. "Empirical analysis of corporate credit lines," Banco de Espa�a Working Papers 0821, Banco de Espa�a.
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  9. Kirschenmann, Karolin, 2010. "The dynamics in requested and granted loan terms when bank and borrower interact repeatedly," Proceedings of the German Development Economics Conference, Hannover 2010 7, Verein für Socialpolitik, Research Committee Development Economics.
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  14. Behr, Andreas & Kamp, Andreas & Memmel, Christoph & Pfingsten, Andreas, 2007. "Diversification and the banks' risk-return-characteristics: evidence from loan portfolios of German banks," Discussion Paper Series 2: Banking and Financial Studies 2007,05, Deutsche Bundesbank, Research Centre.
  15. Patrick Rey & Joseph E. Stiglitz, 1993. "Short-Term Contracts as a Monitoring Device," NBER Working Papers 4514, National Bureau of Economic Research, Inc.
  16. Crouhy, Michel & Galai, Dan & Mark, Robert, 2000. "A comparative analysis of current credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 59-117, January.
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Cited by:
  1. Jahn, Nadya & Memmel, Christoph & Pfingsten, Andreas, 2013. "Banks' concentration versus diversification in the loan portfolio: New evidence from Germany," Discussion Papers 53/2013, Deutsche Bundesbank, Research Centre.

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