Credit risk: an agent-based model of post-credit decision actions and credit losses in banks

S Jonsson

Journal of Simulation, 2012, vol. 6, issue 4, 253-266

Abstract: The credit crisis in 2007/2008 has increased the focus on bank credit risk. This paper uses an agent-based model (ABM) to investigate the impact of bankers’ post-credit decision actions on bank credit losses that are induced by lending to corporate clients. The banker agents are modelled according to results obtained from a survey that was distributed to bankers who are permitted to grant credit to firms. The results show that post-credit decision actions have substantial effects on bank credit losses, thus implying that regulators should consider organizational factors as a complement to bank assets when assigning capital requirements to banks. The study also aims to point to a new area of application of ABMs for both researchers and practitioners. Whereas previous research has used ABMs to simulate financial markets, this study suggests that financial organizations could be a vital area of application.

Date: 2012
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DOI: 10.1057/jos.2012.7

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