Explainable models of credit losses

ZusammenfassungMit dem „(Lifetime) Expected Credit Loss“ hat der internationale Standardsetzer einen prospektiven Wertminderungsmaßstab für Finanzinstrumente entwickelt. Mit Blick auf die dadurch induzierte Stärkung des Gläubigerschutzes sowie eine mögliche Angleichung des deutschen HGB an die Vorgaben der IFRS sollten sich Banken und Versicherungen im genossenschaftlichen Umfeld ebenso wie Prüfungsverbände frühzeitig ein Bild von den anstehenden Änderungen machen.

Download Full-text

Unrecognized Expected Credit Losses and Bank Share Prices

Journal of Accounting Research ◽

10.1111/1475-679x.12353 ◽

2021 ◽

Author(s):

P. Barrett Wheeler

Keyword(s):

Share Prices ◽

Credit Losses

Download Full-text

The Pricing of Unexpected Credit Losses

SSRN Electronic Journal ◽

10.2139/ssrn.860427 ◽

2005 ◽

Cited By ~ 21

Author(s):

Jeffery D. Amato ◽

Eli M. Remolona

Keyword(s):

Credit Losses

Download Full-text

Modeling Credit Losses for Multiple Loan Portfolios

SSRN Electronic Journal ◽

10.2139/ssrn.3117107 ◽

2018 ◽

Author(s):

Petr Gapko ◽

Martin Smid

Keyword(s):

Loan Portfolios ◽

Credit Losses

Download Full-text

The effects of reward system on bank credit losses – an agent-based model

Managerial Finance ◽

10.1108/mf-07-2014-0209 ◽

2015 ◽

Vol 41 (9) ◽

pp. 908-924

Author(s):

Sara Jonsson

Keyword(s):

Reward System ◽

Bank Credit ◽

Reward Systems ◽

Risk Modeling ◽

Agent Based Model ◽

Credit Risk Management ◽

Content Type ◽

Agent Based ◽

Loan Officer ◽

Credit Losses

Purpose – The purpose of this paper is to investigate how the design of loan officer reward systems affects bank credit losses caused by commercial clients. Design/methodology/approach – This paper uses an agent-based model to investigate how the design of reward systems affects bank credit losses. Two different systems are compared: competitive and a cooperative. The model is designed according to the theoretically derived assumption that a cooperative reward system will make agents more likely to share knowledge with each other in the processes of granting and monitoring credit. Findings – The results show that a cooperative reward system have potential to reduce bank credit losses. The reduction of errors in evaluating company’s probability of default thus mitigates variations induced by variations in industry, region, and firm-specific returns. Practical implications – The findings imply that reward system design should be considered in credit risk management. Further, managerial issues (e.g. reward systems) should be considered in risk modeling. Originality/value – The results presented in this paper provide evidence to the value of considering the downside (e.g. loss) when designing reward systems in banks.

Download Full-text

Internal model for IFRS 9 - Expected credit losses calculation

Ekonomski pregled ◽

10.32910/ep.69.3.4 ◽

2018 ◽

Vol 69 (3) ◽

pp. 269-297 ◽

Cited By ~ 2

Author(s):

Hrvoje Volarević ◽

Mario Varović

Keyword(s):

Financial Reporting ◽

Internal Model ◽

Balance Sheet ◽

Analytic Hierarchy ◽

Reporting Standard ◽

International Financial Reporting Standard ◽

External Data ◽

Simple Implementation ◽

Ifrs 9 ◽

Credit Losses

This article explores and analyzes the implementation problem of International Financial Reporting Standard 9 (IFRS 9) which is in use from 1 January 2018. IFRS 9 is most relevant for financial institutions, but also for all business subjects with a significant share of financial assets in their Balance sheet. The main objective of this article is the implementation of new impairment model for financial instruments, which is measurable through Expected Credit Losses (ECL). The use of this model is in correlation with a credit risk of the company for which it is necessary to determine basic variables of the model: Exposure at Default (EAD), Loss Given Default (LGD) and Probability of Default (PD). Basel legislation could be used for LGD calculation while PD calculation is based on specific methodology with two different solutions. In the first option, PD is taken as an external data from reliable rating agencies. When there is no external rating, an internal model for PD calculation has to be created. In order to develop an internal model, authors of this article propose application of multi-criteria decision-making model based on Analytic Hierarchy Process (AHP) method. Input data in the model are based on information from financial statements while MS Excel is used for calculation of such multi-criteria problem. Results of internal model are mathematically related with PD values for each analyzed company. Simple implementation of this internal model is an advantage compared to other much more complicated models.

Download Full-text