Credit risk in banks' exposures to non‐financial firms. (7th September 2017)

• Record Type: Journal Article
• Authors: Accornero, Matteo; Cascarino, Giuseppe; Felici, Roberto; Parlapiano, Fabio; Sorrentino, Alberto Maria
• Is Part Of: European financial management. Volume 24:Number 5(2018:Nov.)
• Page Start: 775
• Page End: 791
• Publication Date: 2017-09-07
• Subjects: credit risk -- sectoral risk -- systemic risk -- structural multi‐factor model; Finance -- European Union countries -- Periodicals; International finance -- Periodicals; Corporations -- European Union countries -- Finance -- Periodicals; 332.094
• DOI: 10.1111/eufm.12138
• Languages: English
• ISSNs: 1354-7798

Abstract

Abstract: This paper outlines a framework based on microdata and a structural model to gauge credit risk in banks' exposures to non‐financial firms. Sectoral risk factors are accounted for using a multi‐factor model. We use expected and unexpected losses as indicators of credit risk stemming from the corporate sector as a whole, and we put forward a measure of systemic risk relevance of economic sectors. We apply the model to the Italian economy, showing the sensitivity of credit risk indicators to different characteristics of default risk, cyclicality and concentration of economic sectors.