Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle

Dimitris Gavalas and Theodore Syriopoulos ()
Additional contact information
Dimitris Gavalas: Shipping, Trade & Transport Department, Business School, University of Aegean, Chios 82100, Greece

IJFS, 2014, vol. 2, issue 1, 1-22

Abstract: Credit risk measurement remains a critical field of top priority in banking finance, directly implicated in the recent global financial crisis. This paper examines the dynamic linkages between credit risk migration due to rating shifts and prevailing macroeconomic conditions, reflected in alternative business cycle states. An innovative empirical methodology applies to bank internal rating data, under different economic scenarios and investigates the implications of credit risk quality shifts for risk rating transition matrices. The empirical findings are useful and critical for banks to align to Basel guidelines in relation to core capital requirements and risk-weighted assets in the underlying loan portfolio.

Keywords: credit rating migration; business cycles; stress testing; Basel guidelines (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.mdpi.com/2227-7072/2/1/122/pdf (application/pdf)
https://www.mdpi.com/2227-7072/2/1/122/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:2:y:2014:i:1:p:122-143:d:33616

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().