Economics at your fingertips  

Forecasting the Net Interest Margin and Loan Loss Provision Ratio of Banks in Various Economic Scenarios: Evidence from Poland

Marcin Borsuk ()
Additional contact information
Marcin Borsuk: Kazimierz Wielki University

Russian Journal of Money and Finance, 2019, vol. 78, issue 1, 89-106

Abstract: The aim of stress-testing is to test the resilience of the banking sector to negative developments on the financial markets and in the real economy. One of the key issues in stress-testing is the translation of various scenarios into bank-level risk parameters and the determination of their impact on banks’ profitability or loss-bearing capacity. This paper has two objectives. The first is to identify key macroeconomic determinants of the loan loss provision ratio and net interest margin. The second is to show how satellite models can be applied in stress-testing exercises to determine the impact of macroeconomic outcomes on banks. We contribute to the empirical literature by defining macroeconomic determinants for credit risk on the basis of three different credit portfolios (consumer, mortgage, and corporate) for banks operating in Poland. Our estimation results suggest that economic growth, the labour market, and market interest rates have a significant influence on the net interest margin and loan loss provision ratio.

Keywords: net interest margin; loan loss provision ratio; stress-testing; financial stability; panel estimation (search for similar items in EconPapers)
JEL-codes: E51 G21 C33 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)

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:

DOI: 10.31477/rjmf.201901.89

Access Statistics for this article

Russian Journal of Money and Finance is currently edited by Ksenia Yudaeva

More articles in Russian Journal of Money and Finance from Bank of Russia Contact information at EDIRC.
Bibliographic data for series maintained by Olga Kuvshinova ().

Page updated 2019-11-24
Handle: RePEc:bkr:journl:v:78:y:2019:i:1:p:89-106