MODELLING THE CREDIT RISK OF THE HUNGARIAN SME SECTOR

Adam Banai, Gyöngyi Körmendi (), Péter Lang () and Nikolett Vágó ()
Additional contact information
Gyöngyi Körmendi: Magyar Nemzeti Bank (Central Bank of Hungary)
Péter Lang: Magyar Nemzeti Bank (Central Bank of Hungary)
Nikolett Vágó: Magyar Nemzeti Bank (Central Bank of Hungary)

No 2016/123, MNB Occasional Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: In banking practice, quantifying the probability of default is one of the most important elements of the lending decision, therefore it is also vital from a financial stability perspective. The aim of our research was to model the probability of default as precisely as possible in the case of micro, small and medium-sized enterprises. By linking the data from the Central Credit Information System (KHR) and companies’ financial statements, a database was created that covers all the SMEs with loan contract, thus we were able to examine credit risk based on a uniquely large group of enterprises. In our research, we created models that enabled us to produce estimates based on certain corporate features about the probability of default of micro, small and medium-sized enterprises. Our analysis revealed that modelling these size categories separately and managing non-linear effects in the case of several variables are especially important. In addition, the impact of the macroeconomic environment on credit risk also proved to be important in the fitting of our estimates.

Keywords: SME; credit risk; credit register; logit model; probability of default (search for similar items in EconPapers)
JEL-codes: C25 G20 G21 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2016
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-rmg
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:opaper:2016/123

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