Asymmetric effects of the business cycle on bank credit risk

Marcucci, Juri; Quagliariello, Mario

doi:10.1016/j.jbankfin.2009.03.010

Cited by 94 publications

(57 citation statements)

References 23 publications

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“…First, the impact of the business cycle on the banks' financial statements is related to the quality of their assets (ECB, 2009b). Banks with lower quality assets exhibit higher probability of default in the downturns, which, among other things, should be considered when calculating their capital buffers (Marcucci and Quagliariello, 2009). Second, many banks maintain significantly higher regulatory capital levels than those prescribed by Basel II (Gordy andHowells, 2006 andJokipii andMilne, 2008).…”

Section: Using Discretion To Calculate Capital Buffersmentioning

confidence: 99%

Bank procyclicality and output: Issues and policies

Athanasoglou¹,

Daniilidis

Delis

2014

Journal of Economics and Business

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The recent global financial crisis has highlighted the importance of the procyclicality of the financial sector. The procyclicality has transformed banks from mitigation mechanisms to amplifiers of changes in economic activity, potentially affecting financial stability and economic growth. The causes of procyclicality can be attributed to market imperfections and deviations from the efficient market hypothesis, while other factors including the Basel-type regulations, accounting standards and leverage have exacerbated it. Several suggestions have been forwarded to attenuate procyclicality, in the form of rules and discretion. They are presented here according to the factors they aim to alleviate. Some of the suggestions have been adopted under the Basel III framework, which explicitly addresses the procyclicality issue.

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Section: Using Discretion To Calculate Capital Buffersmentioning

confidence: 99%

Bank procyclicality and output: Issues and policies

Athanasoglou¹,

Daniilidis

Delis

2014

Journal of Economics and Business

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“…Table 1 summarizes the main statistics of the hazard rate series, Figure 1 presents them and Figure 2 displays their histograms. Series are not stationary, which makes them convenient for the purpose of the analysis, and exhibit asymmetric cyclicality, a pattern also noted by Marcucci and Quagliariello (2009). They also present moderate heterogeneity, with some visible differences across series, although they evolved in a very similar way during the Great Recession.…”

Section: Proposition Amentioning

confidence: 94%

A New Approach to the Unconditional Measurement of Default Risk

2014

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This paper analyzes the unconditional measurement of default risk and proposes an alternative modeling approach. We begin the analysis by showing that when conducted under non-stationarity, the objective of the unconditional measurement changes and that some relevant problems appear as a consequence of the sample dependence. Based on this result, we introduce our approach and discuss its consistency, practical advantages, and the main differences from the conventional static framework. An empirical analysis is also conducted. Under nonstationarity, the regulatory model for the unconditional probability of default distribution performs badly when compared to our approach. Results also show that the capital figure presents a determinant and nontrivial dependence on the homogeneity and severity of the economic scenario represented in the sample. We begin the analysis by showing that when conducted under non-stationarity, the objective of the unconditional measurement changes and that some relevant problems appear as a consequence of the sample dependence. Based on this result, we introduce our approach and discuss its consistency, practical advantages, and the main differences from the conventional static framework. An empirical analysis is also conducted. Under non-stationarity, the regulatory model for the unconditional probability of default distribution performs badly when compared to our approach. Results also show that the capital figure presents a determinant and non-trivial dependence on the homogeneity and severity of the economic scenario represented in the sample.

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“…Marcucci and Quagliariello [11] study credit risks and the business cycles across different credit risk regimes in Italy. Their results confirm that the effect of business cycles on credit risks is more evident in weak financial conditions and hence there is a strong relationship between the severity of the financial crisis and the state of the economy.…”

Section: Literature Reviewmentioning

confidence: 99%

Oil Prices, Credit Risks in Banking Systems, and Macro-Financial Linkages across GCC Oil Exporters

Alodayni

2016

IJFS

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This paper assesses the effect of the recent 2014-2015 oil price slump on the financial stability in the Gulf Cooperation Council (GCC) region. The first objective of this paper is to assess how oil price shock propagates within the macroeconomy and how the macro shocks transmit to GCC banks' balance sheets. This part of the paper implements a System Generalized Method of Moments (GMM) and a Panel Fixed Effect Model to estimate the response of nonperforming loans (NPLs) to its macroeconomic determinants. The second objective of this paper is to assess any negative feedback effects between the GCC banking systems and the economy. The paper, therefore, implements a Panel VAR model to explore the macro-financial linkages between GCC banking systems and the real economy. The results indicate that oil price, non-oil GDP, interest rate, stock prices, and housing prices are major determinants of NPLs across GCC banks and the overall financial stability in the region. Credit risk shock tends to propagate disturbances to non-oil GDP, credit growth, and stock prices across GCC economies. A higher level of NPLs restricts banks' credit growth and can dampen economic growth in these economies. The results support the notion that disturbances in banking systems lead to unwanted economic consequences for the real sector.

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Asymmetric effects of the business cycle on bank credit risk

Cited by 94 publications

References 23 publications

Bank procyclicality and output: Issues and policies

Bank procyclicality and output: Issues and policies

A New Approach to the Unconditional Measurement of Default Risk

Oil Prices, Credit Risks in Banking Systems, and Macro-Financial Linkages across GCC Oil Exporters

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