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Consumer Banking and Credit Risk

  • Rodrigo Alfaro A.
  • Daniel Calvo C.
  • Daniel Oda Z.

Following Jara and Oda (2007), we consider a group of Chilean banks specializing in consumer loans. Taking the dynamics of the group as a whole, we propose a credit risk model that is based on loan loss provisions. Using accounting ratios, we show that a model for this purpose is dynamic and highly non-linear. Our empirical results show that the banking aggregates loan loss provisions, write-offs, and total loans can be modelled for this group of banks using a small number of macroeconomics variables. Actually, we conclude that the output gap is a strong factor in the model, and that the model performs well when only this external factor is considered.

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File URL: http://www.bcentral.cl/estudios/revista-economia/2009/dic/RECv12n3Dic2009pp59_77.pdf
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Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 12 (2009)
Issue (Month): 3 (December)
Pages: 59-77

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Handle: RePEc:chb:bcchec:v:12:y:2009:i:3:p:59-77
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