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Credit risk model for the Estonian banking sector

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  • Rasmus Kattai

Abstract

This 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.

Suggested Citation

  • Rasmus Kattai, 2010. "Credit risk model for the Estonian banking sector," Bank of Estonia Working Papers wp2010-01, Bank of Estonia, revised 04 Feb 2010.
    • Handle: RePEc:eea:boewps:wp2010-01
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    File URL: http://www.eestipank.ee/sites/eestipank.ee/files/publication/en/WorkingPapers/2010/_wp_110.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Castro, Vítor, 2013. "Macroeconomic determinants of the credit risk in the banking system: The case of the GIPSI," Economic Modelling, Elsevier, vol. 31(C), pages 672-683.
    2. Miora Rakotonirainy & Jean Razafindravonona & Christian Rasolomanana, 2020. "Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(2), pages 199-218.
    3. Tochukwu Timothy Okoli, 2020. "Is the Relationship between Financial Technology and Credit Risk Monotonic? Evidence from the BRICS Economies," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(9), pages 999-1011, September.
    4. Kadri Männasoo, 2012. "Determinants of bank interest spread in Estonia," Bank of Estonia Working Papers wp2012-1, Bank of Estonia, revised 22 Feb 2012.
    5. Grigori Fainstein & Igor Novikov, 2011. "The Comparative Analysis of Credit Risk Determinants In the Banking Sector of the Baltic States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 20-45, June.
    6. Nicolae BALTEÅž, & Maria-Daciana RODEAN (Cozma), 2017. "The Financial Stability Of The Romanian Banking System In The European Context," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-43, January.

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    More about this item

    Keywords

    credit risk; stress testing; financial soundness indicators; Estonian banking sector;
    All these keywords.

    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

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