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Macroeconomic Credit Risk Model

In: CNB Financial Stability Report 2005

Listed author(s):
  • Petr Jakubik

This article focuses on the macroeconomic default rate model in the Czech economy. The aim is to produce a model allowing us to estimate the expected proportion of bad loans in the total loan portfolio of banks in response to the evolution of key macroeconomic indicators. The proportion of bad loans is one of the inputs to the stress testing model developed by the CNB. It has so far been regarded as a constant parameter estimated from extreme historical events. The new approach enables modelling of the impacts of various macroeconomic shocks on loan portfolio quality and subsequently, in combination with the stress-testing system, on the capital of the entire banking system. Such shocks may be set either expertly on the basis of historical experience or constructed in the form of alternative scenarios linked to the CNB's main macroeconomic forecasting model.

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This chapter was published in: Petr Jakubik CNB Financial Stability Report 2005, , chapter Thematic Article 2, pages 84-92, 2006.
This item is provided by Czech National Bank, Research Department in its series Occasional Publications - Chapters in Edited Volumes with number fsr05/2.
Handle: RePEc:cnb:ocpubc:fsr05/2
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