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Int. J. Financial Stud. 2014, 2(1), 122-143; doi:10.3390/ijfs2010122
Article

Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle

1
 and 1,2,*
Received: 6 November 2013; in revised form: 11 February 2014 / Accepted: 15 February 2014 / Published: 3 March 2014
(This article belongs to the Special Issue Credit Risk under Moral Hazard)
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Abstract: Credit risk measurement remains a critical field of top priority in banking finance, directly implicated in the recent global financial crisis. This paper examines the dynamic linkages between credit risk migration due to rating shifts and prevailing macroeconomic conditions, reflected in alternative business cycle states. An innovative empirical methodology applies to bank internal rating data, under different economic scenarios and investigates the implications of credit risk quality shifts for risk rating transition matrices. The empirical findings are useful and critical for banks to align to Basel guidelines in relation to core capital requirements and risk-weighted assets in the underlying loan portfolio.
Keywords: credit rating migration; business cycles; stress testing; Basel guidelines credit rating migration; business cycles; stress testing; Basel guidelines
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Gavalas, D.; Syriopoulos, T. Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle. Int. J. Financial Stud. 2014, 2, 122-143.

AMA Style

Gavalas D, Syriopoulos T. Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle. International Journal of Financial Studies. 2014; 2(1):122-143.

Chicago/Turabian Style

Gavalas, Dimitris; Syriopoulos, Theodore. 2014. "Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle." Int. J. Financial Stud. 2, no. 1: 122-143.

Int. J. Financial Stud. EISSN 2227-7072 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert