Using Nonperforming Loan Ratios to Compute Loan Default Rates With Evidence From European Banking Sectors

Dobromił Serwa ()

Econometric Research in Finance, 2016, vol. 1, issue 1, 47-65

Abstract: This research is the first attempt to calibrate default rates of loan portfolios using raw data on nonperforming loans and some additional information on the maturity structure of the loan portfolios. We applied a simple model of loan quality, controlling for loan maturities and dynamics of loan supply. Results for nine national aggregate indices of nonperforming housing loans in the Czech Republic, Greece, Ireland, Hungary, Latvia, Poland, Portugal, Romania, and Spain revealed strong differences in the dynamics of calibrated default probabilities between countries. Calibrated default rates were correlated with macroeconomic factors, but the linkages depended on the markets investigated.

Keywords: NPL ratio; default rate; credit growth; housing loans; European banking sectors (search for similar items in EconPapers)
JEL-codes: C15 C22 G21 G31 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:erfinj:v:1:y:2016:i:1:p:47-65

DOI: 10.33119/ERFIN.2016.1.1.3

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