scholarly journals Quantifying the impact of different copulas in a generalized CreditRisk+ framework An empirical study

2014 ◽  
Vol 2 ◽  
pp. 1-21 ◽  
Author(s):  
Kevin Jakob ◽  
Matthias Fischer
Keyword(s):  
Empirical Study ◽  
Banking Industry ◽  
Economic Capital ◽  
Regulatory Requirements ◽  
Economic Sectors ◽  
Loan Portfolio ◽  
Credit Portfolio ◽  
The Impact ◽  
Credit Losses ◽  
Credit Portfolio Model

AbstractWithout any doubt, credit risk is one of the most important risk types in the classical banking industry. Consequently, banks are required by supervisory audits to allocate economic capital to cover unexpected future credit losses. Typically, the amount of economical capital is determined with a credit portfolio model, e.g. using the popular CreditRisk+ framework (1997) or one of its recent generalizations (e.g. [8] or [15]). Relying on specific distributional assumptions, the credit loss distribution of the CreditRisk+ class can be determined analytically and in real time. With respect to the current regulatory requirements (see, e.g. [4, p. 9-16] or [2]), banks are also required to quantify how sensitive their models (and the resulting risk figures) are if fundamental assumptions are modified. Against this background, we focus on the impact of different dependence structures (between the counterparties of the bank’s portfolio) within a (generalized) CreditRisk+ framework which can be represented in terms of copulas. Concretely, we present some results on the unknown (implicit) copula of generalized CreditRisk+ models and quantify the effect of the choice of the copula (between economic sectors) on the risk figures for a hypothetical loan portfolio and a variety of parametric copulas.

scholarly journals THE IMPORTANCE OF THE RETAIL CREDIT PORTFOLIO FOR ECONOMIC GROWTH OF MACEDONIA

2016 ◽  
Vol 11 (1) ◽  
Author(s):  
Evica Delova Jolevska ◽  
Andovski Ilija
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Special Focus ◽  
Loan Portfolio ◽  
Credit Growth ◽  
Retail Credit ◽  
Credit Portfolio ◽  
The Impact ◽  
By Products

The aim of this paper is to evaluate the influence of trends in retail loan portfolio on the consumption and economic growth of Macedonia. The consumption of population is one of the components of GDP, and one of its drivers is the retail credit activity. On macroeconomic level, there is wide consensus among researchers that credit activity and quality of portfolio is driven by GDP movements, unemployment ratio and indebtedness of population. Also, vice verse the activities in retail segment influence on consumption and indirectly on GDP. So these two linkages enhance between and can result in negative spiral. Negative movements in GDP influence on the quality of portfolio and higher NPL ratio. And higher NPL ratio results in further decrease in credit activity and has additional negative impact on GDP. Because of that is important to determine the causes of credit activity in this segment. The retail portfolio in the last 4 years in Macedonian banking sector is growing continuously, opposite of other Balkan countries. That is why is important to analyze the past growth of retail portfolio and to determine possible weaknesses because of its future impact on GDP. One of the most important drivers that determine the future credit growth is the quality of retail credit portfolio in the moment. Another important aspect for the portfolio trend will be the interest rate environment. There is clear empirical evidence that low interest environment triggers greater credit activity and vice versa. Another important aspect of the credit qrowth, is the maturity of the retail credit portfolio as a way to decrease the monthly installments and to accumulate greater risk on longer term. Special focus of this paper will be the trend in retail loan portfolio after 2008, when the banking system of Macedonia felt the impact from financial crisis. The activities that were taken by the banking sector then can be some guidelines for future crisis. The retail credit growth will be analyzed by products in order better to understand bank strategies and reasons that contributed for such a growth. Also, the analyze of NPL ratio by product will give answer whether the quality of portfolio by products was one of the key drivers for credit activity.

The Variation in the Weighted Average Interest Rate and Its Influence on the Credit Portfolio of the Guatemalan Financial System

2018 ◽  
pp. 138-154
Author(s):  
Mayra Irasema Gaitan
Keyword(s):  
Interest Rate ◽  
Financial Institution ◽  
Financial System ◽  
Weighted Average ◽  
Time Frame ◽  
Economic Stability ◽  
Economic Sectors ◽  
Loan Portfolio ◽  
Strategic Objective ◽  
Credit Portfolio

Due to the fact that the active weighted average interest rate that the banks of the national financial system have applied to the loan portfolio has been stable in recent years, it was considered important to calculate the impact of this measure on the performance of the balance of the loan portfolio by economic activity in Guatemala from 2008 to 2016; it was considered this time frame since the consulted web portals shows more information as of 2008. With the above information, it will be possible to observe the important variations and what events could propitiate it, the percentage of growth and which economic sectors have most financed their operations. The increase in the loan portfolio, in addition to being considered a strategic objective of any financial institution to increase its market share and income, is also a sign of confidence among corporate users, family members, and other entities involved in maintaining the national economic stability.

scholarly journals GCPM: A ?exible package to explore credit portfolio risk

2016 ◽  
Vol 45 (1) ◽  
pp. 25-44 ◽  
Author(s):  
Kevin Jakob ◽  
Matthias Fischer
Keyword(s):  
Sensitivity Analysis ◽  
Banking Industry ◽  
The Novel ◽  
Portfolio Risk ◽  
Model Framework ◽  
Model Risk ◽  
General Importance ◽  
Speed Up ◽  
Credit Portfolio ◽  
Credit Portfolio Model

In this article we introduce the novel GCPM package, which represents a generalized credit portfolio model framework. The package includes two of the most popular mod- eling approaches in the banking industry namely the CreditRisk+ and the CreditMetrics model and allows to perform several sensitivity analysis with respect to distributional or functional assumptions. Therefore, besides the pure quanti?cation of credit portfolio risk, the package can be used to explore certain aspects of model risk individually for every arbitrary credit portfolio. In order to guarantee maximum ?exibility, most of the models utilize a Monte Carlo simulation, which is implemented in C++, to achieve the loss dis- tribution. Furthermore, the package also o?ers the possibilities to apply simple pooling techniques to speed up calculations for large portfolios as well as a general importance sample approach. The article concludes with a comprehensive example demonstrating the ?exibility of the package.

Elucidating perceived overall service quality in retail banking

2017 ◽  
Vol 35 (5) ◽  
pp. 781-804 ◽  
Author(s):  
Zalfa Laili Hamzah ◽  
Siew Peng Lee ◽  
Sedigheh Moghavvemi
Keyword(s):  
Customer Satisfaction ◽  
Empirical Study ◽  
Service Quality ◽  
Banking Industry ◽  
Internet Banking ◽  
Retail Banking ◽  
Service Industries ◽  
Content Type ◽  
Customer Trust ◽  
The Impact

Purpose The purpose of this paper is to examine the dimensions of service quality (SERVQUAL) from the perspective of the customers and its relationships with perceived overall SERVQUAL in retail banking and also investigate the relationships between perceived overall SERVQUAL and customer trust, customer satisfaction, and bank reputation. Design/methodology/approach A survey questionnaire was constructed, and data were collected from 375 regular customers of local banks. The convenience sampling method was employed to collect data from existing customers of local banks operating in the Klang Valley area of Malaysia. Structural equation modelling was applied to analyse the data. Findings The results of the study indicate four key dimensions of SERVQUAL – tangibles, empathy, reliability and security, and internet banking – all of which are significantly and positively related to customers’ perceived overall SERVQUAL. Internet banking facilities are another significant determinant of the perceived overall SERVQUAL. The results are indicative of the strong and positive effect upon customer satisfaction, their trust in the bank, and, finally, a bank’s reputation. Research limitations/implications This study has presented and tested empirical study of perceived overall SERVQUAL model in the banking industry, particularly in the Malaysian context. This research identified the dimensions of SERVQUAL (i.e. tangibles, empathy, reliability and security, and internet banking) that influence the overall perceived SERVQUAL, and how these overall perceptions will eventually influence customer trust, customer satisfaction, and bank reputation is valid and reliable in retail banking industry. This study, however, only focussed on the banking industry. Given the diversity of the service industry, these findings may have to be tested for the applicability to different service industries in future studies. Practical implications This research is useful to bank managers as it helps them improve SERVQUAL to protect and expand their respective market share in a highly competitive industry. Banks could utilise the results of this study to improve their service tangibility, empathy, reliability, and security, which will affect both customer trust and satisfaction, and enhance a bank’s reputation. Social implications The findings of specific dimensions of SERVQUAL will contribute to customer perception of banks’ image and reputation, and strengthen trust and satisfaction. Moreover, assisting customers towards the understanding of how they should received high quality of services with regard to quality should be perceived as emphatic, reliable, secured and tangibility of service. Originality/value The findings of this study highlight the specific dimensionalities of SERVQUAL in influencing the perceived overall SERVQUAL. This study will increase the understanding on the impact of perceived overall SERVQUAL on consumer trust, customer satisfaction, and a bank’s reputation. Specifically, it reports an empirical study of a model of perceived overall SERVQUAL that simultaneously considers the direct effects of perceived overall SERVQUAL on customer trust, customer satisfaction and bank reputation.

scholarly journals The Effect of Banks Website Service Quality and E-satisfaction on E-loyalty: An Empirical Study on Swedish Banks

2017 ◽  
Vol 13 (1) ◽  
pp. 1 ◽  
Author(s):  
Samer Alkhouli
Keyword(s):  
Empirical Study ◽  
Service Quality ◽  
Banking Industry ◽  
Strong Positive Correlation ◽  
Four Dimensions ◽  
Low Levels ◽  
Commercial Opportunity ◽  
The Impact ◽  
The Relationship ◽  
Loyal Customers

The increase in internet use in Sweden provides the country’s banking industry with an important commercial opportunity. High websites service quality (website SQ) and electronic satisfaction (e-satisfaction) are vital if the banks are to keep and guarantee their customers’ electronic loyalty (e-loyalty). The purpose of this study is to provide empirical evidence of the association between website SQ and e-satisfaction, and the impact of both on e-loyalty in Swedish banks. The author used the E-S-QUAL model to measure the four dimensions of website SQ: fulfilment, availability, efficiency and privacy. Questionnaires were sent to 450 customers, of which 213 were returned, either in-person or online. The results showed that website SQ and e-satisfaction have a strong positive correlation with e-loyalty. The relationship between website SQ and e-satisfaction should be continuously measured, and website processes reviewed in line with advances in ICT and changes in levels of e-loyalty. This study gives feedback to these banks on their website SQ, helping them avoid shortcomings and keep their customers satisfied and loyal. Customers with high levels of e-satisfaction have significantly higher levels of e-loyalty compared to those with low levels. 

The drivers of E-banking entrepreneurship: an empirical study

2019 ◽  
Vol 38 (2) ◽  
pp. 485-500
Author(s):  
Khaled Saleh Al-Omoush ◽  
Mohammad Khalid Al Attar ◽  
Isam Hamad Saleh ◽  
Ayman Abdalmajeed Alsmadi
Keyword(s):  
Empirical Study ◽  
Structural Equation ◽  
Organizational Context ◽  
Banking Industry ◽  
Equation Modeling ◽  
Management Support ◽  
Content Type ◽  
Top Management Support ◽  
The Impact

Purpose The purpose of this paper is to investigate the drivers of e-banking entrepreneurship. The impact of e-banking entrepreneurship on banks’ performance in the banking industry is also investigated. Design/methodology/approach A questionnaire was developed to collect data from 16 banks with a sample of 214 respondents. Structural equation modeling using PLS was conducted to analyze the data. Findings The results reveal a significant impact of top management support, organizational context, technological context and social capital on the degree of e-business entrepreneurship. The findings also reveal a direct impact of e-banking entrepreneurship on achieving a competitive advantage, financial performance and customer performance. Originality/value The present empirical study contributes to a better understanding of the existing theories and practices of banking entrepreneurship and e-innovations in today’s banking industry. This study also provides insights into the drivers and the role of e-entrepreneurship in this industry for improving the opportunities of competitiveness and growth. The findings of the present study are of importance to both academic and practitioner audiences. The present study provides empirical evidence to bolster e-banking technology as an enabler of banking entrepreneurship and improving performance. Additionally, these findings provide directives to managers regarding the untapped opportunities and potential that innovative e-banking technology can offer in a highly volatile and rapidly changing environment.

Post-merger changes in bank credit risk: 1991-2006

2014 ◽  
Vol 40 (1) ◽  
pp. 51-71 ◽  
Author(s):  
Morris Knapp ◽  
Alan Gart
Keyword(s):  
Credit Risk ◽  
Financial Analysts ◽  
Risk Profile ◽  
Subsequent Paper ◽  
Investment Portfolio ◽  
Loan Portfolio ◽  
Content Type ◽  
Holding Companies ◽  
The Impact ◽  
Credit Losses

Purpose – This paper aims to examine the post-merger changes in the credit risk profile of merging bank holding companies and tests whether there is an increase in credit risk after a merger due to changes in the mix of loans in the portfolio. Design/methodology/approach – The authors use the expected variability of the credit risk of a loan portfolio based on the mix of loan types in the portfolio and the variability of the industry credit losses of each type following the standard Markowitz procedure for finding the standard deviation of an investment portfolio. The authors then test to see whether there has been a significant change in the expected variability (the credit risk profile) after a merger. Findings – The authors find that there are significant differences in both the level and variability of loan charge-offs and non-performing loans (NPL) among the various loan categories. The authors also find significant changes in the mix of loan categories in the loan portfolio after a merger. In addition, the authors find that the expected variability in both the charge-off rate and the NPL rate rises significantly after a merger. Research limitations/implications – This is the first of two papers looking at post-merger changes in credit risk based simply on the changes in the mix of loan types; it does not consider the actual post-merger credit performance of the specific mergers. That will be addressed in a subsequent paper. Practical implications – Financial analysts evaluating banking merger announcements may wish to include the impact of the likely shifts in loan mix and credit risk shown in this paper as they project the likely impact of the merger. Originality/value – This paper addresses an aspect of bank mergers that has not been addressed in the literature, the impact of mergers on credit risk. The results are likely to be useful to investors, financial analysts and regulators.

scholarly journals The Impact Of PD-LGD Correlation On Expected Loss And Economic Capital

2017 ◽  
Vol 16 (3) ◽  
pp. 157-170 ◽  
Author(s):  
Gary Van Vuuren ◽  
Riaan De Jongh ◽  
Tanja Verster
Keyword(s):  
Credit Risk ◽  
Real Time ◽  
Economic Capital ◽  
Probability Of Default ◽  
Expected Loss ◽  
Loan Portfolio ◽  
Correlation Dependence ◽  
Loss Given Default ◽  
Default Data ◽  
The Impact

The Basel regulatory credit risk rules for expected losses require banks use downturn loss given default (LGD) estimates because the correlation between the probability of default (PD) and LGD is not captured, even though this has been repeatedly demonstrated by empirical research. A model is examined which captures this correlation using empirically-observed default frequencies and simulated LGD and default data of a loan portfolio. The model is tested under various conditions dictated by input parameters. Having established an estimate of the impact on expected losses, it is speculated that the model be calibrated using banks' own loss data to compensate for the omission of correlation dependence. Because the model relies on observed default frequencies, it could be used to adapt in real time, forcing provisions to be dynamically allocated.

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