Linking Financial and Macroeconomic Factors to Stress-Test Credit Risk Indicators for Brazilian Banks

Posted: 25 Aug 2008

See all articles by Marcos Rietti Souto

Marcos Rietti Souto

affiliation not provided to SSRN

Benjamin M. Tabak

FGV/EPPG

Francisco Vazquez

International Monetary Fund

Date Written: August 24, 2008

Abstract

This study constructs a set of credit risk indicators for 39 Brazilian banks, using the Merton framework and balance sheet information on the banks' total assets and liabilities. Despite the simplifying assumptions, the methodology captures well several stylized facts in the recent history of Brazil. In particular, it identifies deterioration in the credit risk indicators of the banking sector, following the crisis in the early 2000s. The risk indicators were regressed against a number of macrofinancial variables at both individual and systemic level, showing that an increase in the system EDF, interest rates, and CDS spreads will lead to a deterioration of the individual expected default probability

Keywords: structural models, credit risk indicators, stress tests, macrofinancial links

JEL Classification: G21

Suggested Citation

Souto, Marcos Rietti and Tabak, Benjamin M. and Vazquez, Francisco, Linking Financial and Macroeconomic Factors to Stress-Test Credit Risk Indicators for Brazilian Banks (August 24, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1251422 or http://dx.doi.org/10.2139/ssrn.1251422

Marcos Rietti Souto

affiliation not provided to SSRN ( email )

Benjamin M. Tabak (Contact Author)

FGV/EPPG ( email )

SGAN Av. L2 Norte - Quadra 602 - Módulos A, B e C
Brasília, Rio de Janeiro 70830-051
Brazil

Francisco Vazquez

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
116
Abstract Views
897
rank
251,098
PlumX Metrics