| Author(s): |
Ing. Mgr. Barbora Štěpánková M.A., Ph.D.,
|
| Type: |
Articles in journals with impact factor |
| Year: |
2021 |
| Number: |
0 |
| ISSN / ISBN: |
DOI: 10.21314/JCR.2021.015 |
| Published in: |
Journal of Credit Risk |
| Publishing place: |
|
| Keywords: |
Risk management, Credit risk, Transition matrices, Banking |
| JEL codes: |
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| Suggested Citation: |
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| Grants: |
GACR 18-05244S - Innovative Approaches to Credit Risk Management
GAUK No. 1278218 Credit Transition matrices based on bank-sourced data and the business cycle
PRIMUS/19/HUM/17 2019-2021 Behavioral finance and macroeconomics: New insights for the mainstream
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| Abstract: |
This study explores banks' internal credit risk estimates and the associated bank-sourced transition matrices. We empirically test the widely used Markovian property and time homogeneity assumptions at an unprecedented scale. Our unique dataset consists of internal probability of default estimates from twelve global banks that employ advanced internal rating-based approach, covering monthly observations on 20,000 corporates over the 2015-2018 period. The results indicate that internal credit risk estimates do not satisfy the two assumptions, showing evidence of both path-dependency and time heterogeneity even within the period of economic expansion. Contradicting previous findings based on data from credit rating agencies, banks tend to revert their past rating actions. This has significant practical implications through bank-sourced credit transition matrices, which are becoming increasingly important as regulators begin to utilise more detailed credit risk datasets (e.g. AnaCredit by the ECB) with potential applications in stress-testing. |
