The Common Drivers of Default Risk

Posted: 2 May 2014 Last revised: 26 Mar 2015

See all articles by Christoph Memmel

Christoph Memmel

Deutsche Bundesbank

Yalin Gündüz

Deutsche Bundesbank

Peter Raupach

Deutsche Bundesbank - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2014

Abstract

Using a unique data set on German banks’ loans to the German real economy, we investigate banks’ credit risk. This data set contains the volume of loans, and write-downs on loans, per bank and industry. Our empirical study for the period 2003-2011 yields the following results: (i) alongside the average nationwide credit loss rate, industry composition, regional factors, and the state of the global economy, the loans’ maturity structure is identified as an additional driver of the bank-wide loss rates in the credit portfolio. (ii) The nationwide loss rate has the largest impact, followed by the maturity structure and the industry composition. (iii) For nationwide banks, these common factors explain about 26% of the time variation in the loss rate of credit portfolios; for regional banks, this figure is less than 8%.

Keywords: Credit risk, Systematic risk, Maturity, Stress tests

JEL Classification: G21

Suggested Citation

Memmel, Christoph and Gündüz, Yalin and Raupach, Peter, The Common Drivers of Default Risk (May 1, 2014). Journal of Financial Stability, Vol. 16, 232-247. Available at SSRN: https://ssrn.com/abstract=2431661

Christoph Memmel (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Yalin Gündüz

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Peter Raupach

Deutsche Bundesbank - Research Department ( email )

Wilhelm-Epstein-Str. 14
Frankfurt, 60431
Germany
+49 69 9566 8536 (Phone)

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